What is a Payday Loan: Everything You Need to Know

What is a payday loan? If you have heard of payday loans, you may be wondering what they are. A payday loan is a type of short-term, unsecured debt that comes with higher interest rates. The total term of a payday loan is typically a month as it is supposed to be paid when you get your next paycheck.

But how does a payday loan work and how much does it cost? In this comprehensive guide, we will learn everything you need to know about payday loans to improve your understanding of them.

So read on.

Payday Loans: Everything You Need to Know

Whether you are applying for a payday loan or simply looking to learn more about how it works, we have detailed everything you need to know about payday loans below.

What Is a Payday Loan?

A payday loan is a type of unsecured loan known for having very high interest rates. It is a short-term loan of a small amount (typically $500 or less) that is due when your next paycheck comes.

The exact amount that you can lend on your payday loan depends on your income. However, since payday loans have very steep interest rates, you should only apply for them if you are in dire need.

How Does a Payday Loan Work and How to Get It?

To qualify for a payday loan, you must have proof of income, a valid ID, and an active bank account. They are offered by payday lenders and are usually very easy to acquire. 

Here’s how they work:

• You apply for a payday loan online or visit a lender’s office to fill out the application.
• The lender will review your application and verify your documents.
• Once your loan application has been approved, your lender will ask you to provide a post-dated check for the next scheduled payday to repay the loan.
• The loan amount will be deposited into your account.

However, do note that payday loans are very risky for the lenders as they don’t check whether you can repay the loan. This is why they come with very steep interest rates and fees for missed repayments. 

Moreover, if the borrower fails to repay the amount, they would have to take out another loan to repay it, making these loans risky for the borrowers too. 

So even if it is easy to acquire payday loans, they can cost you a lot and even harm your credit score if you fail to repay them.

What Type of Credit Is a Payday Loan?

A payday loan is a type of unsecured debt that is repaid all at once, as soon as the borrower’s next paycheck comes. They differ from installment loans, which are repaid in the form of installments, and revolving debt, which is repaid at your own convenience.

How Much Does a Payday Loan Cost?

Unlike personal loans, the cost of payday loans is usually determined in terms of fees, instead of interest. However, the lender is still required to reveal the annual percentage rate (APR) to the borrower.

Typically, every $100 that you borrow from your payday lender will cost you between $10 to $30. For instance, if you have borrowed $200 from your lender and the loan fee is $20, you will have to repay $220 in total.

If you fail to make the repayment on time, you will have to pay extra fees. Therefore, make sure you repay your payday loan on time to avoid added fees. 

Apply For a Payday Loan Today to Get Same Day Funding!

If you are in dire need of cash and your payday is still a few weeks away, don’t worry! Cash in Minutes offers fast and hassle-free unsecured loans so you can meet your immediate financial emergencies.

We even accept bad credit! Don’t let a bad credit score keep you from acquiring cash for your immediate needs. If you are looking for payday loans near me, apply today and get your funding the same day.