If you have a cash emergency a few days away from your next paycheck, you can turn to online payday loans for quick funds. But how safe are applying for payday loans online when you have no or bad credit? This article will explore how payday loans work, their basic features as well as their benefits and shortcomings.
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What is a Payday Loan?
A payday loan also is known as payday advance, payroll loan, salary loan, small-dollar loan, cash advance or check advance loans is a short-term unsecured loan offered for only a short period usually until the borrowers next paycheck.
You can easily access payday loans from the comfort of your home within just a few minutes if you have access to the internet. Online payday lenders offer borrowers instant cash when they have a financial emergency and the salary is still some few days to come. The loan is also provided to borrowers who don’t have sufficient funds to get them through the next paycheck, upon which the loan becomes due and needs a repayment.
You can access $50, $100, $500 or $1,000 payday loans with instant approval, and any other amount in-between.
The specific amount you qualify for will depend on the lender’s assessment of your capacity to repay, the maximum lending limits within your state, and other loan requirements (such requirements aren’t as stringent as installment loans).
Payday loans usually attract very high-interest rates, and it’s only a good option for you if you have an emergency since while they may offer you a quick fix, they do not provide a permanent solution for all your money needs. If you always find yourself in need of a fast loan, you need to examine your current financial situation for ways to change how you budget and plan your finances to see if you can free up any extra money.
Types of Payday Loans
Different types of payday loans exist, based on the type of borrower, the lender’s terms, and the purpose of the loan, among other aspects. Here are the main types of payday loans you’ll find.
1-Hour Payday Loan
With 1-hour payday loans, you’ll get a loan decision within an hour or instant approval. This is a fast and easy process which can help you in extremely urgent situations.
24-Hour Payday Loan
With 24-hour payday loans, you can expect the loan – if approved – to be deposited in your account within one business day. That’s different from typical payday loans that can take 2-4 business days before being deposited in your bank account.
Instant Cash Advance
With instant cash advances or instant payday loans, work on your loan starts as soon as you fill in the online application. Thereafter, the lender may contact you by phone, email, or both to complete the loan application process.
A payroll advance is a short-term unsecured loan allowing employers to release payroll funds to employees in advance.
Military Payday Loan
Military payday loans are specifically designed for people in military service. You can expect friendlier terms (including fees and interest rates) with such types of payday loans, since military personnel must abide by strict financial constraints. Based on the Uniform Code of Military Justice article 123a, military personnel who fail to meet their financial commitments can be transferred, confined, discharged, or even court marshalled.
How Do Online Payday Loans Work?
These loans usually have a very simple process of applying. They only require your details and after they are verified, you receive the cash either immediately or within some hours. Typically, some verification of employment or income sources is involved that is usually via pay stubs and bank statements although some payday lenders do not verify income or run any credit checks.
The payday lender usually explains the service they offer, as great option to clients who require some help or boost regularly. Payday lenders sometimes require post-dated checks to act as the loan’s security. Some payday advance loans rely on the borrower having previous payroll and employment records.
The online payday lenders make money by charging upfront loan fees and high interest with yearly rates that can go very high even as three to six hundred percent on the loans. Different states and jurisdictions are in the process of passing laws to prevent exploitation which is unreasonable and excessive rates of interest. Their aim is to introduce caps that will cushion the consumers from exploitation that usually come with the interest rates on the loans since many people depend on the loans to survive.
What are the Key Features?
Easy access and fast
The loan is tailored to help meet various urgent needs of a borrower, and thus it is a handy online instrument for managing short-term emergencies. It is a cash advance dependent on the expected regular paycheck.
A maximum amount of $1,000
The loan size may range from $50 to $1,000 and may be based on the borrower’s residence, income and credit rating. The loan amount varies from state to state, and the borrowers’ qualifications also depend on different payday lenders. While most states limit the maximum cash advance to $500 or $1,000, few are more permissive.
This type of loan is a costly borrowing method and is preferred mostly by individuals with poor credit or even no credit at all. These loans can be regarded as predatory forms of loans since they possess a reputation of charging exorbitant interest rates and concealed requirements of high additional fees. In most cases the borrower ends up paying considerably huge amounts despite taking small loans, due to the high APR and associated fees.
Different states regulate the interest rate, but it typically varies from 200% to over 600%.
The payday lender calculates the APR considering your income, loan amount and credit rating. A majority of states have usury restrictions that cap interest fees to approximately less than 35%. However, the payday lenders operate under certain exclusions that allow them to charge higher rates in some states.
Debit the money straight to borrower’s account
Online payday lenders make a direct debit into the borrowers’ account. The lenders then require the debtor to provide post-dated checks equaling the borrowed money or debit straight to the account. It grants the lender authority to deduct any money owed by the borrower plus fees, from their account directly.
It is payable once in total
On payday, the lender electronically withdraws the total loan amount plus the interest incurred for the period.
Roll over and renewal benefits
You may request for an extension or roll-over of the loan only in those states that the procedure is permitted. Although this action may get you trapped in a never-ending debt cycle
Payday Loans in each US State
|State||Cities||Payday Lending Legality||Number of Rollovers Allowed||Interest Rate||Maximum Loan Amount||Maximum Number of Outstanding Loans at One Time||Regulator|
|Alabama||Birmingham, Montgomery, Huntsville, Mobile, Tuscaloosa…||Legal||1||456%||$500||None (max $ amount of loans at one time: $500)||State Banking Department|
|Alaska||Anchorage, Fairbanks, Juneau, Sitka, Ketchikan…||Legal||2||435%||$500||Not Specified||Alaska Division of Banking and Securities|
|Arizona||Phoenix, Tucson, Mesa, Chandler, Glendale…||Prohibited||Prohibited||N/A||Arizona Department of Financial Institutions|
|Arkansas||Little Rock, Fort Smith, Fayetteville, Springdale, Jonesboro…||Prohibited||Prohibited||N/A||Arkansas Attorney General|
|California||Los Angeles, San Diego, San Jose, San Francisco, Fresno, Sacramento…||Legal||0||460%||$255 if maximum fee charged ($300 maximum check)||One||California Department of Corporations|
|Colorado||Denver, Colorado Springs, Aurora, Fort Collins, Lakewood…||Legal||1||214%||$500||No limit if total debt does not exceed $500 and 30-days between loans||Colorado Office of the Attorney General|
|Connecticut||Bridgeport, New Haven, Hartford, Stamford, Waterbury…||Prohibited||Prohibited||N/A||Connecticut Department of Banking|
|Delaware||Wilmington, Dover, Newark, Middletown, Smyrna…||Legal||4||521%||$1,000||Limit of five loans from all licensees in 12-month period.||Delaware Office of the State Bank Commissioner|
|Florida||Jacksonville, Miami, Tampa, Orlando, St. Petersburg, Tallahassee…||Legal||0||304%||$500||One||Florida Office of Financial Regulation|
|Georgia||Atlanta, Augusta, Columbus, Macon, Savannah…||Prohibited||Prohibited||N/A||Georgia Office of the Commissioner of Insurance|
|Hawaii||Honolulu1, Hilo1, Kailua1, Kapolei1, Kaneohe1…||Legal (Applies to check cashers only)||0||460%||$600 face amount of check||One||Hawaii Department of Commerce and Consumer Affairs|
|Idaho||Boise, Meridian, Nampa, Idaho Falls, Pocatello…||Legal||3||652%||$1000. Loan cannot exceed 25% of your gross monthly income.||Not Specified ($1000 aggregate loans outstanding to all licensees)||Idaho Department of Finance|
|Illinois||Chicago, Aurora, Rockford, Joliet, Naperville, Springfield…||Legal||0||404%||lesser of $1000 or 25% gross monthly income.||Two||Illinois Division of Financial Institutions|
|Indiana||Indianapolis, Fort Wayne, Evansville, South Bend, Carmel…||Legal||0||382%||$550 (not to exceed 20% of borrower’s monthly gross income)||One per lender; Two total||Indiana Department of Financial Institutions|
|Iowa||Des Moines, Cedar Rapids, Davenport, Sioux City, Iowa City…||Legal||0||337%||$500||Two, $500 total debt||Iowa Division of Banking|
|Kansas||Wichita, Overland Park, Kansas City, Olathe, Topeka…||Legal||Not specified||391%||$500||Two. May not make more than three loans to a borrower within 30 days||Office of the State Bank Commissioner|
|Kentucky||Louisville, Lexington, Bowling Green, Owensboro, Covington, Frankfort…||Legal (Applies to check cashers only)||0||460%||$500||Two ($500 aggregate loans outstanding to all licensees)||Kentucky Office of Financial Institutions|
|Louisiana||New Orleans, Baton Rouge, Shreveport, Lafayette, Lake Charles…||Legal||0||391%||$350||Not Specified||Louisiana Office of Financial Institutions|
|Maine||Portland, Lewiston, Bangor, South Portland, Auburn, Augusta…||Permitted for supervised lenders only||Prohibited||217%||Bureau of Consumer Credit Protection|
|Maryland||Baltimore, Frederick, Rockville, Gaithersburg, Bowie, Annapolis…||Prohibited||Prohibited||N/A||Maryland Commissioner of Financial Regulation|
|Massachusetts||Boston, Worcester, Springfield, Lowell, Cambridge…||Prohibited||Prohibited||N/A||Massachusetts Division of Banks|
|Michigan||Detroit, Grand Rapids, Warren, Sterling Heights, Ann Arbor, Lansing…||Legal||0||369%||$600||Two, only one with same lender.||Department of Insurance and Financial Services|
|Minnesota||Minneapolis, Saint Paul, Rochester, Bloomington, Duluth…||Legal||0||200%||$350||Not Specified||Minnesota Department of Commerce|
|Mississippi||Jackson, Gulfport, Southaven, Hattiesburg, Biloxi…||Legal||0||521%||$500 face value of check||Not Specified. Maximum $500 in one or more checks.||Mississippi Department of Banking and Consumer Finance|
|Missouri||Kansas City, Saint Louis, Springfield, Columbia, Independence, Jefferson City…||Legal||6 (borrower must reduce principal amount of loan by 5% or more upon each renewal)||443%||$500||No more than $500 to any one lender at one time||Missouri Division of Finance|
|Montana||Billings, Missoula, Great Falls, Bozeman, Butte, Helena…||Legal (at a low cost)||0||N/A||$300, up to 25% of monthly net income of borrower||Division of Banking and Financial Institutions|
|Nebraska||Omaha, Lincoln, Bellevue, Grand Island, Kearney…||Legal||0||460%||$500||Two||Nebraska Department of Banking & Finance|
|Nevada||Las Vegas, Henderson, Reno, North Las Vegas, Sparks, Carson City…||Legal||Not Specified (Lenders cannot extend payment period beyond 60 days after expiration of initial loan period)||652%||25% of expected gross monthly income||Not Specified||Nevada Financial Institutions Division|
|New Hampshire||Manchester, Nashua, Concord, Derry, Rochester…||Legal (at a low cost)||0||N/A||$500||One||New Hampshire State Banking Department|
|New Jersey||Newark, Jersey City, Paterson, Elizabeth, Edison, Trenton…||Prohibited||Prohibited||N/A||New Jersey Department of Banking and Insurance|
|New Mexico||Albuquerque, Las Cruces, Rio Rancho, Santa Fe, Roswell…||Legal||0||175%||$2,500||Total loans and fees capped at 25% of gross monthly income||New Mexico Financial Institutions Division|
|New York||New York City, Buffalo, Rochester, Yonkers, Syracuse, Albany…||Prohibited||Prohibited||N/A||New York State Banking Department|
|North Carolina||Charlotte, Raleigh, Greensboro, Durham, Winston-Salem…||Prohibited||Prohibited||N/A||North Carolina Attorney General|
|North Dakota||Fargo, Bismarck, Grand Forks, Minot, West Fargo…||Legal||1||487%||$500||Not Specified ($600 aggregate loans outstanding to all licensees)||North Dakota Department of Financial Institutions|
|Ohio||Columbus, Cleveland, Cincinnati, Toledo, Akron…||Legal (at a low cost)||0||677%||$500||One, four per year||Ohio Division of Financial Institutions|
|Oklahoma||Oklahoma City, Tulsa, Norman, Broken Arrow, Lawton…||Legal||0||395%||$500||Two||Oklahoma Department of Consumer Credit|
|Oregon||Portland, Salem, Eugene, Gresham, Hillsboro…||Legal||2||154%||$50,000 (Loan limit up to 25%of borrower’s net monthly income if earns $60,000 per year or less.)||No Limit||Oregon Department of Consumer & Business Services|
|Pennsylvania||Philadelphia, Pittsburgh, Allentown, Erie, Reading, Harrisburg…||Prohibited||Prohibited||N/A||Pennsylvania Department of Banking|
|Rhode Island||Providence, Warwick, Cranston, Pawtucket, East Providence…||Legal||1||261%||$500 face amount of check||3/$500||Rhode Island Department of Business Regulation|
|South Carolina||Charleston, Columbia, North Charleston, Mount Pleasant, Rock Hill…||Legal||0||391%||$550||One||South Carolina State Board of Financial Institutions|
|South Dakota||Sioux Falls, Rapid City, Aberdeen, Brookings, Watertown, Pierre…||Legal||4||N/A||$500||Not Specified||South Dakota Division of Banking|
|Tennessee||Nashville, Memphis, Knoxville, Chattanooga, Clarksville…||Legal||0||460%||$425 ($500 check)||3 (2 per licensee) to maximum $500 face value of check/s||Tennessee Department of Financial Institutions|
|Texas||Houston, San Antonio, Dallas, Austin, Fort Worth…||Legal||0||662%||Not specified||Texas Office of Consumer Credit Commissioner|
|Utah||Salt Lake City, West Valley City, Provo, West Jordan, Orem…||Legal (Applies to check cashers only)||Not Specified (cannot extend or renew loan more than 10 weeks from original loan date)||658%||No Limit||No Limit||Utah Department of Financial Institutions|
|Vermont||Burlington, Essex, South Burlington, Colchester, Rutland, Montpelier…||Prohibited||Prohibited||N/A||Vermont Banking Division|
|Virginia||Virginia Beach, Norfolk, Chesapeake, Richmond, Newport News…||Legal||0||601%||$500||One||Virginia Bureau of Financial Institutions|
|Washington||Seattle, Spokane, Tacoma, Vancouver, Bellevue, Olympia…||Legal (Lender must have a small loan endorsement to their check casher license to make payday loans)||0||391%||$700 or 30% of gross monthly income, whichever is less||check(s) less than $700 aggregate face amount plus fees from one company. 8 loansin one year.||Washington Department of Financial Institutions|
|West Virginia||Charleston, Huntington, Morgantown, Parkersburg, Wheeling…||Prohibited||Prohibited||N/A||Office of West Virginia Attorney General|
|Wisconsin||Milwaukee, Madison, Green Bay, Kenosha, Racine…||Legal||1||574%||Lesser of $1,500 including fees or 35% gross monthly income||No Limit||Wisconsin Department of Financial Institutions|
|Wyoming||Cheyenne, Casper, Laramie, Gillette, Rock Springs…||Legal||0||261%||Not Specified||Not Specified||Wyoming Division of Banking|
What Are Some Benefits And Dangers Associated With Online Payday Debts?
Advantages of when applying payday loans online
You get quick and instant access to funds.
Fast application process. Applicants spend less than 5 minutes in filling their details.
Online payday lenders give feedback on their decision within a few hours.
Someone does not require a great credit rating to acquire payday advance. You can still get the approval even with a bad or even poor credit history as long as you have a paycheck coming up.
You can’t delay in payment since you repay by your salary that goes into the account or any other amount that goes through the account.
Dangers that comes with these loans
If the account has a deficit on the repayment date, you may surpass the account’s overdraft perimeter or may even face the consequences of a bounced check.
If you opt for a rollover on your loan, you might end up paying fees even higher than the original amount.
The APRs may exceed the original loan considerably, and so it’s vital to go through all conditions and terms before you accept the offer.
If you default on payday loans, it could have an impact on your credit rating.
Payday loans charge high fees and interests and require quick repayment of the loan which often makes it difficult for a borrower to pay off the loan and still meet regular monthly expenses. So, you may quickly find yourself trapped in debts cycle that never ends since you mostly take another loan every time you repay the previous one for you to survive. It is crucial to creating budgets for your expenses to avoid that.
Payday Loan Alternatives
An online payday loan is a convenient alternative if you have an urgent cash need, but you should never allow it to be your constant source of financial remedy because it is costly and can quickly exceed your ability to repay it.