If you’re in a financial bind and need a little cash before your next paycheck, a payday loan may be just what you need.
Payday loans, also known as a cash advance, are gaining in popularity as a fast way to get quick cash for an emergency situation. Even so, many people don’t understand how this type of loan works and what you need to get a payday loan.
So if you are thinking about getting a payday loan and are unsure of what you need to get one, keep reading to learn about what do you need to get a payday loan and how much money you can borrow now.
What Are Payday Loans?
Let’s start by explaining what payday loans are and how to utilize them best.
Simply put, a payday loan is a short-term loan that is intended to be repaid in full with your next paycheck. These loans are usually for a small amount between $300 and $1,000. They are a popular loan option for those with no credit or a bad credit score.
Note that the cost of a payday loan can be very high, which is why it is so important to pay them off with your next paycheck. The costs can rise exponentially with each pay period that passes without paying the balance in full.
It’s good to know all the benefits and risks of payday loans so you can make an educated choice that’s in your best interest.
What Do You Need to Get a Payday Loan
Many states regulate payday loans differently resulting in different qualification requirements depending on where you live. But typically, you only need to meet a handful of criteria.
You must be at least 18 years old and you will need a valid government identification, your Social Security number, proof of income (pay stub) and an active checking account. If you are applying in a payday loan store, you will need a personal check. If you are filling out an application online, you must enter your email address.
When you get a payday loan, you must submit a personal check for the entire balance to be paid on the date of your next payday.
Even if you meet the above requirements, you can be denied a loan for a number of reasons. For example, you may not earn enough to borrow money. Most lenders want you to earn at least $500 per month.
The lender also considers are the length of time you have been at your job and how recently you opened your checking account.
They may also reject your applications if you have a recent bankruptcy or bounced checks. And most companies will not issue you a loan if you already have an outstanding loan.
How Much Money Can I Borrow?
The amount of money you can borrow also varies state by state and in how each state regulates loans. Most states limit how much can be borrowed, which usually falls between $300 and $1,000.
Lenders determine the amount you can borrow the same as other lending institutions assess risk for other loan products. Payday lenders take into account your income and expenses along with your lending history to determine an amount they know you can reasonably expect to pay back.
The Bottom Line
So what do you need to get a payday loan? Not much, really. You must be at least 18 and meet the handful of requirements listed above.
Before you get a payday loan, make sure you will make enough on your next check to repay the full balance while also meeting your other obligations. If you are unable to repay the loan for a few more pay periods, the resulting interest gains could result in a debt trap for you.
Payday loans are best used when you need emergency funds, and you have more than enough to repay the loan with your next paycheck.
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