What is a Payday Loan and How Do You Apply?

If you have ever found yourself in a financial pinch while waiting for your next payday, having a little extra money in your pocket to get through the situation is the answer. Few people set out aiming to overspend on their budget, but unforeseen circumstances arise, leaving you with little or no alternative but to seek some financial help.

This is when a payday loan might be your solution.

Payday Loan Concept

What is a payday loan?

A payday loan is a short-term loan designed to give the user prompt access to money when they realize they will not have the funds to last until their next pay cheque. Payday loans are usually repaid within a week or two, with the repayment amount deducted from your bank account or any alternative payment method you and a lender agree on.

Essentially, as a payday loan applicant, you consent to a cash advance against an upcoming pay cheque, which makes this type of quick and easy loan different from others. 

Payday loans are referred to by some other names, including cash advance loans, deferred deposit loans, post-dated cheque loans, or cheque advance loans. Regardless of terminology lenders use, the principle behind the loans remain the same.

Qualifying for a payday loan

Payday lenders have several criteria that a potential borrower must meet. For example, you must be 18 or older, have valid identification, and provide proof of income and an active bank account.

It can take as little as 15 minutes to get an application done, provided your paperwork is complete and in order.

How much money can you borrow on a payday loan?

Your proof of income supplied during the application will determine the maximum value of the payday loan you will be granted. Most lenders have a company policy on what percentage of your income they will lend to you in a payday loan. The best advice is to take as little as you can so that the repayment amount does not take a significant bite out of your next month’s salary. A smaller debt means a lower repayment figure.

Payday loans with bad credit

One of the main advantages of a payday loan is that an application is often not subjected to a credit check before approval. Before applying, find out if the lender will be subjecting your application to a credit check as you might need to go somewhere else to secure your payday loan.

Bad credit means that access to other loan types is restricted or impossible, which is why the payday loan can be a lifesaver if you need to borrow a small amount of money. However, many payday lenders will still require you to provide proof of income and employment status before approving your application.

Is a payday loan the answer you are seeking?

Everyone has a bad month on occasion, and there is no harm in getting some financial help from a registered payday lender instead of a loan shark. However, if you are getting a payday loan to pay off other loans, it might be time to sit down for a thorough review of your financial affairs. Borrowing from Peter to pay Paul is a sign that you need help to get yourself out of the debts that are placing too significant a limitation on your disposable income.

There are many institutions where you can seek financial advice about managing your debt. You might even be able to consolidate it into an amount with a smaller repayment. Alternatively, a financial advisor, such as a debt counselor, can contact your creditors to change your current payment arrangement to bring you some financial relief.

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