If you don't pay the loan on time, the lender can cash the check or electronically debit your account. Payday loans are almost always more expensive than personal loans when it comes to borrowing money, and they're also riskier. If you qualify for a personal loan, choosing this option will allow you to borrow more money, give you more time to repay it, and charge you a lower interest rate. If you need emergency money, you must first apply for a personal loan.
You can borrow money from a pawn shop by using one of your valuables as collateral for your loan. The lender will hold the item and lend you an amount that is normally a portion of the item's resale value, often for a high fee. Payday lenders generally don't assess your debt-to-income ratio or factor in your other debts before granting you a loan. Check NerdWallet's database of local alternatives to payday loans to see what's available in your state.
Payday loans only require proof of identification, income and a bank account and are often given to people who have bad or non-existent credit. Before you apply for a payday loan, talk to banks and credit unions about your lending options and find the best available rate. Although the name suggests that the loans are linked to the borrower's paycheck, lenders sometimes issue loans if they are sure that the borrower will soon have access to cash payment. Based on your credit profile, the charges and interest on a personal loan may be so high that a personal loan may not make sense to you.
The lender will require you to write a post-dated check to cover the loan plus the fee and tell you that the check will be cashed at the end of the loan period, usually two weeks. To qualify for a payday loan, you usually need an active bank account, ID, and proof of income, such as a paystub. You may think that a payday loan is the only solution to handling an emergency bill, or even to pay off another debt, but the truth is that a payday loan will end up costing you more than the problem you are trying to solve. You don't need good credit, some may advertise as installment loans without a credit check, but you usually have to meet the requirements of a payday loan.
If your payday lender doesn't require a strict credit check and you can repay the full amount by the required date, a payday loan will usually not negatively affect your credit. You may not be able to get a traditional bank loan to meet your needs for quick cash, but some of these methods of stretching your finances the next payday might work better than a payday loan. Also, most payday lenders don't perform a credit check; if the lender isn't interested in your credit history, this could be a sign that you're dealing with a payday lender. If you can't repay the loans, and the Consumer Financial Protection Bureau says that 80% of payday loans are not repaid in two weeks, the interest rate soars and the amount you owe increases, making it almost impossible to repay them.
This loan is usually offered by a bank, credit union, or online personal loan lender, and you will typically need to provide them with proof that you can eventually repay the loan.