Everyone needs a little help sometimes.
If you find it hard to make it to your next payday, you’re not alone! Many people have unexpected expenses in the middle of the month that they have to stretch every dollar to pay for. In fact, sometimes it’s hard to pay for everything at all!
What do you do when too many bills come before your next paycheck?
You might get some extra work from either your current job or another part-time job, take out a small loan from a friend, or sell something to make ends meet. But maybe you don’t want to part with your best stuff or you cannot find a friend who is willing to loan you the money you need before your next payday. Sometimes your friend might be having the same trouble you are making their money stretch.
When there doesn’t seem to be a solution for your temporary financial struggles, a Payday loan or Cash Advance might be a good temporary solution.
What is a payday loan?
A payday loan, unlike a normal long-term bank loan, is a short-term loan that is only loaned for a couple of weeks. In some cases it can be loaned for up to a month, depending on when your next payday comes.
Most cash advance companies will write up your contract to coincide with your next payday. This is why it is often referred to as a payday loan. In essence, you are borrowing an “advance” on your next paycheck until you get paid. Then you are supposed to use your paycheck to pay back the loan within a reasonably short period of time.
Since these loan companies only deal in quickie loans that last only a few days or weeks, they can afford to loan you the money provided you pay them back at your next payday.
Are there loans for people with bad credit?
Payday loans are a type of short term loan that you can get regardless of your past credit history. Whether you have flawless credit or terrible credit, these types of loans are available to anyone with a current job and checking account. In fact, these are practically the only criteria.
How would I go about qualifying for a cash advance?
If you decide that you want to take out a cash loan, you will need the following things when you apply.
- Photo ID (government issued)
- Open/active bank account
- Source of income
- Working phone number
The above list is all you need in most cases but this will be determined by the policies of the cash loan advance location you apply with and what the regulations are in your state.
You are required to furnish proof of income so that the payday loan company will be assured that you will be able to pay them back on your due date. Consider this like collateral like a regular bank might ask for without having to put any actual money or possessions down as the collateral. The collateral, in this case, is your checking account. It gives the loan company legal permission to automatically deduct the amount you borrowed (plus applicable interest and fees) on your due date.
By providing information such as your banking information, place of employment, and working phone number, the loan company has some confidence that they will get their money back plus interest. That is how they are able to loan you money without actual collateral.
In some cases, payday loan companies accept a physical possession such as a piece of jewelry or another item as collateral. This kind of loan is slightly different but the principle is the same. For companies that do it this way such as pawn shops that double as cash loan establishments, they may allow you to pawn a stereo or diamond watch in exchange for the amount of cash the owner thinks they could sell your item for if you are unable to pay the loan.
If your due date comes and you cannot meet your obligation to pay it back, the pawn shop will keep your item to resell at a higher price. Some people actually prefer this type of loan because they are not required to pay back the money if they have an item the pawn shop can use to turn into cash. However, parting with valuable items is difficult for some people and they would rather just deal in cash.
Most lending locations do not offer this option but some may do so if they also deal in merchandise. This is why many of these types of businesses have also owned pawn shops. That way, they can make money either way if someone takes out a loan of this kind.
What Payday Loans Do for the Borrower
These types of loans are not meant to be long-term financial plans, nor are they the kind of loan you should take out on a regular basis. But they do offer a temporary financial relief for situations where it is hard to stretch through to your next payday without severe financial distress.
So, when you don’t know how you will meet even your simplest obligations, it may be a way to get ahead until you can get to your next money to settle your debts.
In essence, bad credit loans offer the following:
- A way to pay pressing bills until you get more money
- Temporary financial relief for needed medical or dental treatment
- Money for college or school expenses
- Miscellaneous money to get by while readjusting your budget
How much can I borrow with this type of loan?
The amount you can borrow with payday type loans will vary depending upon the company you are dealing with, the amount of funds the company has available to loan, and a few other factors. Some companies allow you to borrow only small amounts at first. Then you may be able to increase the amount you borrowed later if you pay back your first loan with interest on time.
Part of how much you can borrow also depends on your ability to repay the loan on time. As long as you have an income that provides enough income to pay back your loan according to the terms, you should be able to increase the amount you can borrow in the future.
Some Things to Remember
As you are gathering the information to take out a short term loan from a payday cash loan location, you should keep in mind that failure to pay back the loan won’t result in a “hot check” charge like some have said in the past. Instead, it is something that would go on your credit rating as a failure to pay. This can result in more damage to your credit rating. So you need to make sure you will have the money needed to pay back the loan on time when you reborrow.
Higher Interest Rates than Traditional Loans
Another factor you need to keep in mind before you take out this type of loan is that you will be paying back a higher interest on these loans than with traditional bank loans. The average interest rate is around 15%. APR rates can also surpass most standard loans. But remember you are paying for the privilege of borrowing money when you do not have the collateral or the insurance to ensure the loan company will get their money back.
They are taking a chance on you paying them back. So the higher interest is like an insurance policy to such companies in case you are unable to pay back the loan.
The higher finance charges and interest rate discourages some people from borrowing money using this option. But for people who need the money fast, it is one of the few ways they have to get ahead enough to pay pressing expenses.
The best way to handle a cash loan is to plan ahead. If you know that you are going to need more money than you have available before payday, you can put it into your budget for the following month as a required payment.
Budget for everything so that you will always have enough money to make ends meet. If you are reading this post, you probably have a bit of a problem with this anyway. So this is a good opportunity to revisit the way you are managing your money and plan new and better ways of figuring your budget so that you will always have enough.
As a basic rule, you will pay between 15 and 30% in interest for every $100 that you borrow. So if you plan to take out a $500 loan, you will need to budget for the $500 on your next payday plus an additional $150 in extra charges. You will always have to pay back more than you borrowed with any type of credit or advance. So it is really not that much different from traditional loans except the accumulation of interest happens over a much shorter period of time.
You get what you pay for
In closing, payday or bad credit loans are a viable alternative to traditional bank or credit loans when you do not have the credit rating to be able to do it that way. Without this type of alternative, many people would experience large bank fees from overdrawn checks or even “hot check” charges from bounced checks they cannot pay.
Many people borrow to cover such bounced checks that they inadvertently made when trying to pay bills with checks that do not have the funds to cover them. This can land you in hot legal waters with local authorities. So for many, getting a cash loan like this is the only way to avoid legal issues.
No one ever wants to struggle with bills, have to worry about “hot check” issues or other financial nightmares. But when the expenses are more than bills or you have a temporary setback from medical expenses or other foreseen expenses, this can be a viable option for people who do not have any other means of obtaining quick cash.
Where to Find Payday loan companies
If you are thinking about taking out a payday loan, you can start by doing a search in your immediate area for cash advances. You should also be able to find some locations in your own town. But if you don’t, there are plenty of these companies who do business online.
Just use caution regarding which companies you consider dealing with. There are state and federal laws regarding cash loans that the companies are required to follow. Recently, President Trump recently released many of these regulations though. So it is now easier than it was under the previous (Obama) administration to take out a loan of this kind. Perhaps he remembers how he lost almost a billion dollars with a bad investment and needed some help from lenders to get back on his feet. But he never gave up and he relates to people who suffer temporary setbacks with their finances.
Do a search for Payday Loans if you think this is a good option for you. Then create a budget that you can stick with so that you will have an easier time managing money in the near future.
Many people consider getting a cash loan as an opportunity to get ahead from a temporary financial hurdle. It gives you the ability to pay an immediate bill, pressing overdue notice, or delinquent IRS payment. It gives you the power to make ends meet until you can get to your next paycheck.
Just think of it as a temporary fix, plan how you will use the money once you receive it, and distribute it to make it last as long as possible. Make a note of your due date on your phone app or calendar. Then resolve to work on your budget so that you will have the money you need in the future by getting a second income, readjusting your budget, or cutting expenses.
But don’t be ashamed to ask for help. After all, everyone needs a little help from time to time.