Online payday loans are ideal if you find yourself in a pinch and all other alternatives for borrowing money have failed you. And while they offer a quick loan solution that will put money in your hands at your most needy moment, they may also have certain features that may not be all that pleasant to you as a borrower. In essence, online payday loans can be a real lifesaver but they may also not suit all financial needs.
With that in mind, it’s always a good idea to understand what they entail, their upsides and downsides, and the best time for you to consider them. We’ll guide you through all aspects of this loan option and provide all the information you need at hand before you take the plunge.
What Online Payday Loans Are
Payday Loans are small loans offered on a short-term basis at a high-interest rate. They are also called ‘cash advance loans’ or ‘cheque advance loans’ and are offered based on a proportion of your next paycheck. Online payday loans are offered by online applications, unlike ‘in-store’ payday loans which are offered in physical stores, typically close to shops, markets, and other small business facilities.
The good thing is, your credit history is not a main consideration when it comes to payday loans. As long as you have a steady income stream that can effortlessly pay back the loan you want to get, there are high chances lenders will approve your loan application. If your income isn’t stable, you can still get a loan but lenders may ask for collateral to cover themselves.
How Online Payday Loans Operate
Online payday loans work in a very simple way and can be of great help especially if you need cash super fast and your credit history is not at its best. While there are different lenders with different application requirements, the standard procedure of getting an online payday loan starts with filling out an online application form, providing some additional documents once your application has been reviewed and the funds being deposited into your bank account once everything checks out.
It’s a simple process that could take as little as five minutes, and see your loan approved. When it comes to receiving the instant cash advance, there are times when your application may be done in minutes and there are times when there may be delays that may lead to you receiving the money on the following business day. This is often due to irregularities in your application.
Many lenders don’t decide to approve your loan based on your credit history, instead, they focus on other factors like your income source to see how likely you are to pay back the loan without struggling, in the case that they approved it.
The repayment period for payday loans is also relatively short (usually between two to four weeks) and you may be expected to pay the full amount on the loan’s due date. This means that the borrower should commit themselves to a repayment date that will fall on or before the date they receive their next paycheck. In the event that you realize that your paycheck will come in late, or discover that you will need every penny of your paycheck, many (not all) lenders will allow you to roll over the loan and extend the repayment period. All at an additional interest rate, of course!
Advantages of Online Payday Loans
The popular benefits of working with payday loans online include:
- Flexible lending guidelines that don’t put much emphasis on borrower’s credit history
- Access to loans throughout the day and night as the loan application is done online
- Quick application process and decision-making by lenders
- Fast transfer of funds to borrower’s bank account after approval
The Disadvantages
While there are great benefits of payday loans online, there are also downsides to them that include:
- A limited repayment period
- Very high-interest rates
- At times (although rarely), lenders may require the borrower to give a collateral
- Often requires bulk payment as opposed to installment payments
Different Options for Online Payday Loans
There are basically two types of online payday loans: secured online payday loans and unsecured online payday loans.
Secured Online Payday Loans
Some online lenders may require collateral for you to qualify for loan disbursement. This usually consists of a personal asset, such as ownership documentation for your car or house. In case you fail to repay your loan, these lenders reserve the right to assume ownership of your valuable asset and sell it to cover their expenses and settle the loan.
Unsecured Online Payday Loans
As earlier mentioned, most online payday loans are unsecured. This means that you’ll not be asked to provide any valuable item as collateral to qualify for a payday loan. Lenders use your proof of income to determine if you’re eligible to receive a loan. Some lenders may require your permission to electronically ‘pay’ themselves from your bank account, as a repayment method, so that you don’t have to worry about missing the repayment date yourself.
Online Payday Loans Interest Rates
As earlier said, online payday loans come with hefty interest rates and it’s essential to study the offers you get from different lenders to see which one favors you the most. Most states have laws that cap interest charges to between 5% and 30%. However, there are still exemptions that allow the interest to go beyond that. On average, borrowers can pay as much as 400% in Annual Percentage Rate (APR), with some going as high as a whopping 780%.
With all that said, 16 states in the United States restrict payday loans of any kind. These are Maryland, Massachusetts, Montana, Arkansas, Colorado, Arizona, Pennsylvania, South Dakota, Vermont, Connecticut, Georgia, New Jersey, New York, North Carolina, West Virginia and New Hampshire, and the District of Columbia!
How to Know if You’re Eligible
The first and most fundamental requirement is to live in a state where online payday loans are allowed. If you do, there are a few other general requirements you’ll need to meet before you can be considered for an online payday loan. The requirements are very simple and basic, and they include:
- Having a verifiable source of income
- Being an adult (typically 18 - 21 years old)
- Having a government-issued ID like a passport or a driving license
- Having an active and valid email address and phone number
- Having an actively transacting bank account
Keep in mind, the eligibility criteria may vary slightly in some states. Also, depending on the type of payday loan you opt for, lenders may or may not expect you to meet a few other requirements specific to the loan option you’re looking forward to getting.
Frequently Asked Questions About Online Payday Loans
When is it ideal to consider applying for online payday loans?
The terms and conditions are designed in a way to fit a very urgent emergency and a situation where you’re sure you’ll receive your next paycheck in a relatively short period. If your situation doesn’t fall within these confines, you should consider exploring other options like friends and family, credit unions, advance from the company you work for, requesting donations from charitable organizations and religious organizations, credit cards, or even soft loans by banks. This is especially the case if you aren’t looking to receive any paycheck within a month or sooner. Failing to consider such factors can have devastating consequences, as the loans will be more costly and lock you in a perpetual cycle of repayment and ever-increasing interest payments and other charges. It may even see you lose an asset you gave the lender to act as collateral.
How much can I get?
When it comes to the maximum amount you can get with payday loans online, it all depends on each lender. You can expect anywhere between $150 to $5000 depending on the lender you choose. If lenders determine that you check out all the key factors they consider to see your level of creditworthiness, you may be able to receive the maximum amount. If all factors don’t check out, lenders will offer you a small amount. If at all you want more, you can still get it on the condition that you take the higher amount with a higher interest rate as well. Collateral may also allow you to receive more money. It’s advisable to have an amount in mind that you’re looking for, as opposed to aiming for the maximum amount a lender is willing to give you. While the latter might work for some people, it might also subject others to hefty interest rates!
Will lenders consider my credit history when making approval decisions?
Not necessarily. So long as you have an existing and active source of income, then you’re eligible for an online payday loan even with bad credit. The lender only needs to be sure that you presently have the means to settle your loan repayments should they approve your loan application, and not if you have three defaulted loans from the past. With that said, lenders might dig a bit into your credit history in the event that your source of income is limited. This is known as a soft credit check that doesn’t hurt your overall credit score. For example, this may happen if you already have another loan tied to your single source of income. Nonetheless, some lenders may still go ahead and do hard credit checks that may alter your credit score. In cases like these, exploring other loan options like secured payday loans where you provide collateral can help increase your chances of approval.
What are the charges and terms for payday loans?
The charges as well as the terms and conditions for online payday loans will depend on the state you’re living in. To know how much you can get from this loan option as well as the additional charges in the state you reside in, we recommend you check out the Rates and Terms page.
Upon approval, how soon will I get the money?
For most lenders, you should be able to get your emergency pay day loan as soon as the day you send your application. Typically, the funds are processed and deposited to your account within minutes or hours. The longest it may take is two days. That means, your money should hit your account by the end of the following business day.
Do I need to pay to apply for a payday loan online?
No. Applying for a loan using our Cash Payday Loans service is completely free!
What are the different ways I can spend my loan?
You can do whatever you want with the money. If you have a medical emergency (or for one of your family members), or you have some due utility bills or home repairs you urgently need to take care of, or if you’re even planning to make a huge purchase for an upcoming event, the loan money can help you handle that.
What is APR (Annual Percentage Rate)?
The annual Percentage Rate is the amount of interest you pay per year for your payday loan. APR is a good tool to use to determine which loan is the best for you and exactly how much you’re paying for the loan.
Is the interest rate on payday loans variable or fixed?
The interest rate on payday loans is fixed as the borrower is required to pay a one-off payment around the time they receive their paycheck. Actually, many lenders replace the word “interest rate” with the word “fixed charge” for every given amount of money borrowed.
How do I manage payday loan repayments effectively?
As part of due diligence, you might want to have your personal loan calculator before making any borrowing decisions to ensure that you’re able to foot all charges aside from the interest rates. Many borrowers tend to overlook these additional costs because of the short-term nature of the loan, but they can break your bank in the long run, especially if you happen to roll over the online payday loan.
How are late repayments handled by payday loan lenders?
In the case of late repayment, you’ll incur charges as agreed with the lender you’re working with. Charges are not the same with every lender. Some may choose to add an extra fee of $10 per day after the due date while others may decide to charge you an interest rate of 1% each day. It all depends on the lender’s method of operation. To avoid finding yourself on this side of the loan agreement, ensure you plan yourself well enough to repay the loan on the due date.
What happens when I fail to pay my loan?
Defaulting on a loan can be quite a dangerous move to make. Your loan may attract countless fees that may make it harder to repay. If you still fail to repay, the lender may choose to pass over your personal information to credit bureaus that will ensure it affects your overall credit score. When your credit score becomes affected, your ability to apply for another loan in the future becomes crippled. That’s why it’s better to reach out to your lender right away when you determine that paying back the loan is going to be difficult for you. The lender may provide a more flexible payment option for the loan repayment when you express your commitment to pay despite lacking money at that particular time.
How does Cash Payday Loans stand out from direct payday lenders?
With direct payday lenders, you can only apply to one at a time and not all lenders will be able to give you the same day loan or even a loan that is available the next day. With Cash Payday Loans, you get to send one loan application to many lenders with just a click of a single button, and without paying extra. In short, Cash Payday Loans saves you time, effort, and money.
How do online payday loans differ from other types of loans?
The two differ in terms of the target audience. Payday loans are aimed at borrowers with an urgent emergency that can’t wait until their next salary. Other loans are aimed at other types of audiences to cater to different purposes.
How am I supposed to make repayments on payday loans?
Lenders have varying options of repayment to choose from that they can provide their customers to make repaying the loan easy and convenient. Some of the options include sending a check when you receive your monthly income, using a different type of credit, writing a check for a future date during your application, or using your lender’s online platform.
Is taking a payday loan a good idea?
Payday loans and other types of instant online loans can save when you’re stuck between a rock and a hard place when you need it the most. However, that may come with a hefty price tag when you consider the interest rate you’ll get charged for it. Keeping this in mind as you think about getting a payday loan will help you know when the right time to take this loan option is.
Is a payday loan online the simplest loan I can get?
Yes. Compared to all other unsecured loan options, a payday loan is the easiest and quickest loan you can get. It doesn’t have many requirements although it comes with extreme interest rates and expensive charges. If you’re more interested in secured loans, then you should consider a car title loan as that’s more convenient.
Where can I get more answers to other questions I have about payday loans?
Our Frequently Asked Questions (FAQS) page has many more answers to other questions you may have about online payday loans and other loan options.