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

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

Payday loans are small short-term loans borrowed on a post-dated check that is then cashed on the borrower’s payday. Typically, payday loans come with high interest, however, they are designed to be quick and easy to get. Borrowers who are in dire need of funds with means of paying back in the nearest future are the ones who usually take payday loans. It is also pretty easy to qualify for a payday loan, as the requirements are limited. Expert Payday Loans are also referred to as cash advances, post-dated check loans, deferred deposit loans, or check advance loan.

Even though payday loans are easy to get, they often come with high-interest rates. In addition to costly rates, borrowers are charged when they do not pay on time and in full. These charges are what makes payday loans a huge risk. Borrowers who are finding it hard to manage existing debts or are in a bad financial situation are not advised to take payday loans.

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau, also known as the CFPB is an independent agency that operates under the Federal Reserve System. The sole purpose of the CFPB is to protect and adequately educate consumers about their dealing with financial institutions and markets. The CFPB’s goal is to ensure federal laws governing financial matters are adhered to and consumers are treated fairly by financial services.

As instructed by the CFPB, most payday lenders should only demand borrowers meet the following conditions to become eligible for a loan: the borrower must have a checking account which must be active; proof of income must be provided by the borrower, borrower must possess a valid identification and must be at least 18 years of age. If all these requirements are met, the loan application process can take as less as 15 minutes. When applying for a payday loan, borrowers have to write a check for the loan amount, which should include the lending fee, and the lender holds the check, to be cashed on the predetermined due date.

To pay off the loan, borrowers can either pay their loans by allowing the lender to cash the check as initially agreed or write another post-dated check to cover the amount of the loan. It is easy to run into financial trouble when one cannot pay off a payday loan on the due date. Default fees are charged each time a borrower postpone payment of their payday loan, and these charges build up very fast.

As mentioned earlier, payday, loans are easy to get, they are also accessible to borrowers with poor credit. Some lenders may not require a pay check to give a payday loan, which makes it more accessible for people without a steady means of income.

Payday Loan Qualifying Amounts

The qualifying amount to get a payday loan depends on the payday lender and the borrower’s income, even though, most states have laws stating maximum payday loan amounts. In some states, borrowers might not be able to secure multiple outstanding payday loans. This is to keep consumers from borrowing more than they can afford to pay off. Depending on state law, loan amounts can vary from $50 to $1,000.

Payday Loan Interest Rates

It is mandatory for borrowers who are planning to take a payday loan to review the loan requirement before they opt for the loan. Even though business models and regulations limit the size and duration of payday loans, these loans often exceed 500% or even 1000% annual percentage rate (APR). Therefore, it is quite expensive to take these types of loans and borrowers are advised to tread carefully.