Payday loans are a popular loan choice for people dealing with an unexpected bill and who don’t have the needed cash at the moment. Many Americans go through tiny financial struggles regularly where they give to cover a small-amount cash emergency. If this sounds familiar, you ought to know the potential benefits of payday loans and how these can be the perfect short-term solution for small financial struggles.
Who Can Apply?
Also known as small-dollar loans, payday loans are small loans that are paid back with the next paycheck. Their instant accessibility contributes much to their popularity. While the eligibility requirements for payday loans may vary from one lender to another, as a rule of thumb, here are some universal eligibility requirements:
- The potential borrower must be 18 or above.
- The potential borrower must be a citizen of the United States and reside in a state that provides the services of payday loans.
- Potential borrowers must provide their personal details (email/ phone number) and social security number.
- The potential borrower must provide proof of steady income and have an active bank account (usually in good standing).
The Benefits of Payday Loans
Among the top benefits of payday loans, you will find the benefit of instant accessibility on number one. This aspect is specifically true for payday loan lenders that operate only and want to make the lending process as quick as possible.
If the potential borrower meets all the eligibility requirements, they can receive the money in their active checking account on the same business day. While the maximum loan amount of the payday loan varies from one state to another, the usual amount stands somewhere between $300 and $500. The associated fees and interest rates also vary from one state to another.
Since the lenders of the payday loans want to make it easy on the borrowers to get the much-needed amount and also pay off their debts as easy as they can, the lenders incorporate a convenient payback process by offering a range of options, such as electronic funds, online payments as well as auto-pay options that enable borrowers to schedule the date of payment.
Usually, payday loans don’t require hard credit checks. This kind of flexibility makes them a popular loan option for people who are dealing with a sudden financial emergency, such as car repairmen, home improvement, medical bills, etc. As compared to the traditional loan system, such as the loans provided by the bank, payday loans are instantly accessible and allow people to benefit from instant cash.
Secured vs. Unsecured Loans
If this is your first time applying for a loan, you ought to know the difference between a secured and unsecured loan. A secured loan usually requires collateral, which can be anything valuable, such as a car, house, and any other valuable asset. Usually, secured loans have a lower interest rate and are available in extensive installments. Unsecured loans, on the other hand, don’t require collateral. However, these come with a higher interest rate. Payday loans are usually unsecured loans, and many lenders don’t check the borrower’s credit score if they check all boxes of their eligibility criteria.
While payday loans can make a great option for anyone who is dealing with a sudden financial emergency but has a bad credit history and cannot ask their bank for a loan, it is important to mention here that after the loan is approved, you will have to be diligent in loan repayment.