What Are the Basic Requirements to Qualify for a Payday Loan?

Payday loans, which are also sometimes called cash advance or short-term loans, usually come with very minimal requirements. That’s because these loans are designed for people who need a fast and easy solution to their financial situations. They can give borrowers the peace of mind of paying an emergency room fee or making it to the next payday by allowing them to essentially cash a check ahead of time. 

Conditions for getting a payday loan

Most payday lenders only require that a person be of legal age, have an active checking account, and some type of regular income. The amount you qualify for usually depends solely on the amount of your income, but it’s usually fairly small since it is short-term. One hundred to one thousand is a pretty typical range. The most appealing part about these types of loans is that there’s usually no credit check. If there is one, the threshold for credit scores is very low.

Regulations of payday loans

Payday loans may have gotten a bad rap in the past, but the truth is that they are very strictly regulated by the CFPB (Consumer Financial Protection Bureau). For one thing, the CFPB states that no more than two withdrawal attempts be made from the same account. So, if you’re in further financial trouble, you can rest assured knowing that a payday lender cannot keep trying to take money out of your bank and racking up overdraft fees. This doesn’t mean you’re not responsible for the loan amount. It just means that you’ll be given the opportunity to pay a different way. 

Additionally, payday lenders have to disclose everything in writing. This includes all your rights, any changes to your agreement, and specific information about your particular loan. This means you can be sure everything is out in the open and you won’t be hit with any surprise fees or withdrawals. 

How does a payday loan work?

Getting a payday loan is a fairly simple process. These lenders know that you may have a financial emergency that needs immediate attention. You can find payday lenders in most average-sized cities. Or you can look for payday loans online, which is a much more convenient process.

You’ll usually have to produce at least one form of identification, your bank account information, and all your personal information. This would include your social security number, contact information, and place of employment. You’ll also have to verify your income. This is usually done with pay stubs or bank account records. Most of the time, the lender will not need to check your credit and you’ll be given the cash immediately.

Since these are short-term loans, your loan amount will usually be withdrawn on the next pay cycle. But occasionally, they’ll set up multiple payments. These installments will be withdrawn in equal amounts on each payday until the loan is paid in full. 

Your responsibilities as a borrower

As a borrower with any type of lender, there are certain responsibilities you need to be aware of before you proceed. For one thing, you alone are responsible for raising or maintaining your credit score. Your loan activity with these companies can go on your credit report just like any other. While they don’t necessarily report anything right away, if you default on the loan, they usually will. So treat payday loans just like your mortgage or car payment to keep from tanking your credit score. 

Also, make sure you can afford the payments that will be withdrawn from your account. You may be in an emergency situation now, but it’s still important to think ahead to avoid another one. Study your paperwork well and figure out whether or not the payments will fit into your budget.