Many people who need to borrow quick cash often resort to getting payday loans online. But due to the bad practices of some lenders, payday loans are strictly regulated by state laws. That’s why it’s crucial to educate yourself about the rules and regulations before applying for a payday loan .
You should read the terms and conditions of the loan, and ask questions to the lender whenever the stipulations are confusing to you. We have put together a few things to think about before signing on the dotted line.
The Process of Applying for Payday Loans Online
The application for payday loans is done online. So, it’s no hassle when you apply for it, and you can also obtain the sum of money you want to borrow immediately after the lender approves your application.
The processing time of online payday loan applications is way faster than going to a credit union or bank. It typically takes only 15 to 30 minutes, making this loan option great for borrowers who need money urgently.
Requirements When Applying for a Payday Loan
Like any other type of loan, you need to provide your personal information to the lender when you apply for a payday loan. The Consumer Financial Protection Bureau of the United States mandates lenders to ask borrowers for personal details, such as:
- Name of the loan applicant (proven by a valid ID)
- Age of the applicant (must be 18 years old and above)
- A valid home address
- An active bank account
- Proof of income (salary slip)
The lender also has the right to confirm the authenticity of the information mentioned above by contacting the workplace of the loan applicant. However, the lender is prohibited from calling any of the friends or family members of the borrower. As a loan applicant, you also shouldn’t give out the contact details of your friends and family members to your lender.
Regulations on Payday Loans
As mentioned earlier, you should do some research regarding the regulations on online payday loans. Keep in mind that every state in the US has its own laws governing this matter. So, you better do your assignment or ask some consultants who know the basics of taking out a payday loan in your state.
You should also ensure that the lender has a license. Ask for this information before you apply for the loan to confirm that the lender is conducting business within the bounds of the law and following the rules and regulations put in place by the Consumer Financial Protection Bureau of the United States.
Take note of these regulations below so that you can protect your interest when applying for payday loans.
- Your lender can’t give you a loan amount that exceeds 50 percent of your monthly income.
- Lenders who provide payday loans can charge a maximum of $15 for every $100 you borrow.
- It’s a must for the lender to explain the loan’s annual percentage rate (APR).
- A payday loan is an unsecured loan, which means that you’re not required to put up a valuable asset as collateral.
- Taking out a payday loan doesn’t need a guarantor.
- Lenders who provide payday loans must never offer services that are not related to the loan you’re applying for unless you’ve asked for it.
- Lenders of payday loans are not allowed to offer a new loan until the last one is paid.
- Your lender should inform you about the total amount (this includes the interest and extra fees) that you need to repay.
- Your lender should clearly specify the date when you should pay the loan.
When is the Best Time to Get a Payday Loan?
When there are unexpected or emergency expenses that you need to cover, a payday loan can be a solution to your problem if you have exhausted all other options. Compare this option against bank overdrafts and credit card overcharges. You’ll see that taking out a payday loan can save you money in the long run.
It can be more costly if you opt to pay your credit card overcharges, and the same is true when you overdraft your bank account. While it’s true that payday loans have high APRs, the impact on your finances will only be for a short time, especially if you pay off what you owe early. Make sure you understand the terms of your loan and work with reputable lenders that allow you to pay off your loan early without penalties or fees.
Plus, online lenders that provide payday loans don’t require excellent credit scores from their applicants. Even if you have bad credit, you can still avail of this loan whenever you need a sum of cash for unforeseen expenses.
Failing to pay off your loan per the terms of your contract will have a negative impact on your credit profile so be sure you have the ability to make your payments on time.
Before you get an online payday loan, you should first read the rules and regulations governing it. This is to ensure that you find a trusted lender that doesn’t charge high-interest rates and fees. As you know, there are predatory online lenders right now. So, always keep in mind to protect yourself from them by equipping yourself with the right knowledge.