What You Need to Know About Payday Loans

\With the various available loan options, choosing the best lender financing during emergencies can be overwhelming. Read on for six things you need to know about payday loans to help you make an informed decision.

A Payday Loan is Unsecured

If you need urgent financing but do not want to use your house, vehicle, or other valuable items as collateral, you should consider applying for payday loans. This is because these are always unsecured.

Most lending companies request to electronically access your prepaid card, bank, or credit union account to deduct cash on the due date. Other lenders will ask you to write them a check for the total repayment amount to cash once your loan is due. 

A Payday Loan is a High-Interest Rate

While payday lending companies will not demand any collateral, they often impose high-interest rates to protect themselves. Payday interest rates usually range between 300% and 400% annual percentage rates. 

You Do Not Need Good Credit to Apply For a Payday Loan

It can be challenging to secure a traditional loan, especially when you have a negative credit score because lenders such as banks heavily rely on your credit history and record to offer to finance. This is not the case with payday lenders. A payday lender will not check your credit history, so you are eligible for a loan even with bad credit. For instance, you could qualify for ODSP payday loans if you are part of the Ontario Disability Support Program, so long as you present proof of employment income or pension, regardless of your credit score.

However, it is worth noting that even though payday lenders will not check your credit, failing to repay your loan will cause them to submit your account to collections. This information will appear in your credit report, further ruining your credit score.

You Can Rollover Your Payday Loan

If you do not have enough funds to settle your loan within the specified time, most payday lending companies will allow you to push back the deadline. However, you will incur additional charges on the loan principal and the initial fees. Constantly rolling over your loan could cause your loan to add up, so you need to pay your debt promptly.

Payday Loans Are Short-Term Loans

Most lending companies require you to pay your payday by your next paycheck or within two to four weeks. Defaulting on your payments could attract additional charges, including: 

• Return-payment charges or late fees for paying past the set deadline
• Non-sufficient funds fees. You incur non-sufficient funds charges when you do not have enough money in your bank account, when the lending company tries to withdraw funds electronically or when cashing your check.

Payday Loans Have a Fast Approval Process

One of the most significant reasons why you should consider applying for a payday loan is the ability to secure financing on the same day. Unlike traditional loans, where lenders have a lengthy approval process as they have to assess your credit history and verify other documentation requirements, your online payday loan application is approved or rejected instantly. Some basic details you need to apply for a payday loan include your birthdate, permanent address, ID, bank account, and proof of regular income.

Endnote

Before taking out a loan, it is crucial to compare your loan options to make the right financial decision. Familiarize yourself with the above information to decide whether or not a payday loan is right for you.