Have you ever resorted to a quick high-interest borrowing? If yes, you have probably opted for a payday loan. In this article, we will exactly know how you get approval for a payday loan. It also includes the repayment formalities. For anyone who needs short-term financing from time to time, go through this piece of information thoroughly.
What is a Payday Loan?
Precisely, payday loans are high-cost short-term borrowings that can be repaid once you receive the next salary. The loan amount generally ranges between $300 to $400. It is set according to your next paycheck. The higher your salary is, the more you can stretch out of the lender.
From the Lenders’ Perspective
Almost every payday lender checks borrower’s income and current bank balance to ensure that the amount will be repaid. They are very cautious about it because people can engage in fraudulent activities by not repaying on time or at all. For all lenders, this is a heads up because they can opt for other lending opportunities if they suspect anything like that.
However, it is one of the best opportunities because you can charge a higher interest rate. And once you ensure that the person has enough income, the repayment is almost definite (unless he is a fraud). Every state has its own guidelines set to keep a check on these activities. You need to be aware of the terms like credit access business, deferred deposit, cash advance, deferred presentment etc. Also, you have to comply with every regulation set by the concerned authorities.
From the Borrowers’ Perspective
As mentioned above, payday loans offer an excellent opportunity to borrow money instantly. However, it comes at a cost. Payday loans are somewhat more expensive than other types. Also, you might not find these options the best opportunity when it comes to privacy. Still, even if you have bad credit, borrowing from a payday lender is the best option.
When it comes to instant approval, you can get your sanctioned amount within 15 minutes. However, the time depends on the lender as well. It only takes as much time that an electronic transfer might take.
In another case, when the loan is issued at the store, you have to make an appointment with the lender. The same goes for the time when you have to repay. If you’re building a good relationship with your lender, he can give you the loan very frequently. A good relationship means regular repayment without causing any inconvenience to the lender.
The detailed requirements of a payday loan
There are some misconceptions about the qualification of a borrower for a payday loan. Let’s straighten out everything for you.
- You can be rejected for a payday loan even if you have a high bank balance and income level. Lenders generally require at least $500 of monthly income to grant the loan of even the minimum amount.
- If your previous habits suggest that you don’t repay on time, the loan can be rejected immediately.
- Online payday loans for bad credit are also available. Again, it depends on how your repayment habits turn out to be.
- It might depend on lender to lender regarding how he wants to minimize the risk and maximize income.
- Payday lenders might also analyze all your existing loans before sanctioning the amount. If they find any extra burden on your income, they might reject the loan.
- If you have filed for bankruptcy recently, the lender can easily reject the amount.
- If your current job is in danger and the lender suspects your termination, he might reject your loan immediately. The same goes for the situation when you have just joined a job.
- If your bank account has just been opened, and you do not have any history of repayment of loans, the lender might reject the loan.
So, every case when the payday loan might get rejected is mentioned here. Go through each situation and make sure you have a backup plan if you fall into any of these categories.
The expenses associated with payday loans
Generally, people are the most curious about interest rates associated with payday loans. It might get as high as 15%. However, some people, like military men, who have the privilege to borrow at a lower interest rate. Online bad credit loans might be on the higher side of the interest scale. No matter what credit score you have, you can still borrow the money. But the interest rate can be influenced. If you have a good credit score and/or can wait for the approval, go for the conventional borrowings.
Further, it depends on your convincing skills and how much money you need at that point. Make sure that your income is more than what you borrow. And the margin should be enough to bear that debt. Otherwise, you might end up falling into a debt trap. You’re not entitled to pay any hidden fee on payday loans, and that’s a significant relief for the borrowers.