Payday Loans: A Beginner’s Guide

March 15, 2019 | By Louis Tully


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If you’ve never been tempted to get one, then you haven’t heard of payday loans. Imagine it’s that time of the month again and the rent is due. Without thinking twice, you write a check for the proper amount, stick it in an envelope, postmark it, then send it on its way. The next day, you just so happen to check your bank account only to find that you’re $300 short!

The check is going to bounce! What do you do? You could call your bank and cancel the check, but then you still have to find a way to get the rent paid. You could try calling your landlord, but all they might do is offer you an extension on the due date, which won’t really help come next time the rent is due. So now what? Enter the payday loan.

Payday loans are short term loans that allow consumers to get cash quickly right when they need it most. But here’s the kicker, you can get a payday loan even if you suffer from bad credit. So, even if you haven’t gotten around to spring clean your financial closet, you could still find financial relief from a lender. No matter where your score sits on the credit spectrum, payday loans are (for the most part) easily accessible even if you’ve been turned down by everyone else.

How Do Payday Loans Work?

To put it simply, payday loans do not require a credit check because they are secured loans. This means a lender will require you to provide a blank check from your primary bank in order to offer you a loan.

As a matter of fact, there are a few requirements you’ll need to meet before getting approved for a payday loan:

  • Proof of income: A lender will first ask you if you’re currently working and expecting a paycheck in the very near future. If you’re aren’t carrying a steady job, you may not qualify for a payday loan.
  • A postdated bank check: Also the lender will need a signed blank check that’s been postdated (the date of your next payday) from your primary bank. This check will be used as collateral to secure the loan.
  • Driver’s license: Of course, you will need to provide either a valid driver’s license or a state I.D. to prove your identity and residence.
  • Direct deposit: Most lenders will require you to have direct deposit set up beforehand. This shouldn’t be a problem since most consumers already have direct deposit set up in the first place.

So here’s the payday loan breakdown:

  • You need cash.
  • A payday lender provides cash in exchange for a postdated check.
  • Your payday loan is paid back to the lender via the postdated check (the date of your following payday).

How Can I Get the Most Out of My Loan?

While payday loans are highly convenient, they’re also highly expensive. It’s not unusual for lenders to charge up to $30 for every $100 borrowed. That means that a typical $500 payday loan could end up costing the consumer $650.

But that’s not all. When you account for interest and potential late fees, the bill could quickly skyrocket into some unwanted territory. And since payday loans have an extremely short repayment period (usually up to 2 weeks), falling behind could be easier than you think. And if that happens, you may wind up rolling over to a future payday, potentially starting the cycle all over again.

So, how do you get the most out of your payday loan without getting into an endless cycle of debt? To put it simply, you have to do your homework! Check in with your local lender and don’t be afraid to ask all the questions necessary for you to understand all the facts. There’s certainly no shame in asking and your local lender will be more than happy to go over all the necessary details with you.

How Do I Get Started?

Getting started is easy. You can contact your local lender or simply visit a store location near you. Once at the store location, the lender will be able to go over the details and walk you through the process. In as little as 30 minutes from entering the store, you could walk away with the extra cash you need to fill the payday gap. Sound simple? Well, it is!

Other Options to Consider

Aside from payday loans, there is a multitude of other options you could explore before resorting to a last-minute payday. Here are just a few:

    • Personal loans: If your credit’s in the right place, you really don’t need to resort to payday loans to get the cash you need. Personal loans allow you to borrow more and often come with much lower rates and flexible repayment periods.
    • Pawning valuables: If you have valuables cluttering your living space, you could do yourself a huge favor by pawning them. You’ll get cash on the spot with no need to mess with shipping or communicating with buyers. Plus, you’ll simultaneously be cleaning out your home. It’s a win, win!
    • Yard sale: If you have enough inventory cluttering your home, you could throw a yard sale. People tend to get the most from their valuables by selling them off their driveway as opposed to just pawning them. If you don’t mind the extra work, it’s much more rewarding.
    • Pick up some odd jobs: Another way to get fast cash without taking out a loan is by picking up a few odd jobs. Search the ads on Craigslist or ask around your social circles (friends, family, neighbors, etc.)
    • Start a fundraiser: If you can’t take out a loan, have nothing to sell, and are not able to work, you could always consider raising the money you need. Tell your story explaining why you need the money on one of several fundraiser websites; GoFundMe, Facebook, Plumfund, etc. Many people have found these sites very useful for combating tight financial situations.
    • Talk to your family: If all else fails, try asking your family for help. More often than not, your family can offer support when times get tough.

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Are Payday Loans the Best Option?

The short answer is, no. But it all depends on your situation. If your financial emergency is dire enough and you don’t have any other means for getting cash, then a payday loan is certainly an option to consider. But keep in mind that if you’re not prepared to pay the money back by your next payday, you could end up paying more than you intended. Talk to your local lender today and find out if payday loans are a good option for you.