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What Is A Payday Loan And How To Qualify For One

Millennial Magazine - payday loan

A payday loan is a short-term loan, typically two weeks, and the fees associated with them are high. The payday lender will want to be sure that you can repay the loan when it comes due, so they may ask for certain documents such as pay stubs or bank statements to verify your income and expenses. If you are in need of a small amount of cash quickly, a payday loan may be the best option for you. Just be sure to understand the terms and fees involved before you apply.

What Is A Payday Loan?

Payday loans are short-term cash advances that may be offered by payday loan establishments. One benefit of payday loans in Hinton, Alberta is that you can use them for any purpose, which is not the case with some other loan products. This type of loan may also be issued by banks or credit unions. Payday lenders make money from interest collected on payday loans and from administrative fees collected when a payday loan is repaid late.

Payday lenders do not determine a borrower’s eligibility only based on their credit history, but if they can prove that they have an adequate source of income and a bank account, most payday lenders will offer payday loans to qualifying borrowers. Payday loans are a convenient way for borrowers who may not have access to other forms of short-term credit to get the money they need quickly.

The typical loan amount is between $100 and $1,000, although some lenders may offer larger loans. The fee for a payday loan is usually around $15 for every $100 borrowed, which equates to an annual percentage rate (APR) of almost 400%. This high APR is why it’s important to understand the full terms and conditions before applying.

How To Qualify For A Payday Loan?

The qualifications for a payday loan are not as strict as some other loan products, but there are still some basic requirements. The lender will want to be sure that you can repay the loan when it comes due, so here are some basic requirements to qualify you for a payday loan.

Have A Bank Account

Having a bank account is the first step to qualifying for a loan. This lets you have access to your money, enabling you to get funds when you need them. Banks are required by law to keep records of their clients’ income levels, which are then beholden to the companies that offer the loans. They will have access to your bank account and credit rating, so being able to prove that you can handle a loan is the first step to actually getting one.

You Must Have A Steady Source Of Income

To qualify for a payday loan, you must have a steady source of income, which is usually your current employment status, and it has to be enough to repay the payday loan in one lump sum when it’s due. If you can’t afford to repay the loan when it’s due, then you will not be able to use a payday loan service and will have to look into other small and fast loans.

Some companies that offer payday loans sometimes do not require that your income must come from employment or any source at all. For example, some payday loan services will allow you to use government benefits, child support, or alimony as your form of income. But, in most cases, you will need to have a job and a steady paycheck in order to be approved for a payday loan.

If you are self-employed, then you might have a harder time qualifying for a payday loan, but it is not impossible. Many payday loan companies will ask to see copies of your bank statements or tax returns in order to verify that you do in fact have a steady source of income. So, if you are currently unemployed or self-employed, you might want to look for a different type of loan.

Pay Your Bills On Time

One of the biggest ways banks figure out if they want to do business with someone is whether or not that person pays their bills on time. This includes any loans that you presently have, as being late on even one payment can provide a red flag for future lenders wanting to do business with you. If you don’t pay your bills at all, then banks will likely assume that paying back a loan isn’t something you would reasonably be able to handle, making it unlikely that your application for a loan will be approved. By avoiding this pitfall, you will already be ahead of most other borrowers.

Proof Of Banking Activities

Most payday lenders will require proof of your banking activity at certain institutions before they can issue a loan. In order to prove this, they’ll most likely ask for checking or savings account numbers from two different institutions at which your deposits have been made within thirty days from the day of your application. This way, if one place does not report back with information about whether or not you meet their minimum income requirement, the other will be able to verify this.

Some lenders may also ask for recent bank statements from the last sixty days in order to review your account history and get a better idea of your overall financial situation. Reviewing your account activity is one way that payday lenders can determine whether or not you have the ability to repay the loan amount on time. So, if you’ve been making regular deposits and have a positive balance, then you’re likely to be approved for a loan.

You Must Be At Least 18 Years Old

You must be at least 18 years old to qualify for a pay-day loan. This is because it’s considered to be an adult contract. And payday loans are intended for short-term use only, and the lender needs to ensure that you’re of legal age to enter into a contract. Many people don’t realize this before they sign the contract (which could sometimes mean trouble), but you should always read all of the fine print before applying for or taking out any form of debt. If you are younger than 18, there are several types of loans that can help you get by until you’re eligible for these high-interest rate repayment options.

These are requirements you will need to meet in order to qualify for a payday loan. The first is that you have an active bank account, must be at least 18 years old. You must have a job and receive a regular paycheck, and you must have a good bills payment history. If you meet these qualifications, then you should be able to easily qualify for a payday loan.

What do you think?

Written by Hannah Whittenly

Hannah Whittenly is a freelance writer and mother of two from Sacramento, CA. She graduated from the University of California-Sacramento with a degree in Journalism.

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