Roughly 40% of Americans say that they could not cover a $400 emergency expense.
If you’re living paycheck-to-paycheck, we know the thought of what could happen if you were faced with a surprise expense often keeps you up at night. Perhaps you’re even dealing with one now, and can’t wrap your head around how you’re going to afford it.
In some cases, you may simply want to take advantage of a good offer on something you’ve always wanted. Though you know you’ll have enough money when you get your next steady paycheck, you can’t quite afford it now.
Learning how to get a payday loan is likely your best option.
Payday loans are short-term loans that are usually in amounts of up to $1,000. Think of them as a kind of “advance” on your next paycheck from a lender as opposed to your company’s accounts.
So, what should you look for in the right payday loan?
Read on to make the right financial decision.
The Basics of Payday Loans
Whether you’re applying for payday loans for self-employed individuals or for those with a traditional employer, there are a few things you need to focus on above all else.
First, consider the amount that you plan to take out.
The good news is that borrowing amounts are often low, so you aren’t as at risk for borrowing more than you really need as you are with other loans.
Still, because these are short-term loans in smaller amounts, the interest rate attached to payday loans is often quite high. Take out the least possible amount of money you need to get by.
Often, this means taking a hard look at things you can cut in your budget, or even selling off items you no longer need or use. Make certain that the interest rate isn’t going to end up doubling the total cost of your loan.
Next, ask the lender about any fees, commissions, or early/late repayment penalties associated with the loan. These fees may make you realize that the loan isn’t truly worth it. Or, you could avoid being hit with a massive “surprise” fee by asking the right questions upfront.
Payday Loans vs. Credit Cards
One of the most common questions that people have regarding payday loans based on income is why they’re a better option than credit cards.
Especially if you already have poor credit, then your chances of being approved for a credit card aren’t exactly high.
But knowing how to get a payday loan also means that you’ll likely be able to avoid a credit check altogether. This is especially ideal for those with bad credit. After all, even an inquiry into your credit can cause your score to take a hit.
Finally, payday loans, though they do have high-interest rates, still usually have rates lower than those attached to a credit card.
When to Use a Payday Loan
Above all else, you need to be certain that you’re applying for a payday loan for the right reasons.
Deciding to splash out on a cute designer handbag that’s alleged “a great deal” is not a good enough reason to take on any kind of debt. But if you need to buy a suit because you have an interview for another, better-paying position? That might be worth it.
Many people also use payday loans to cover surprise medical expenses or even to cover the costs of their medications.
Funeral expenses, bill payments, and even grocery money are also smart reasons to take out a loan.
In the end, go with your gut. You already know which reasons to take out a loan are truly legitimate.
How to Apply for a Payday Loan
There are numerous ways that you can apply for a payday loan. Most people choose the simplest option: applying online through a third-party lender.
Though you can certainly apply through a bank or other financial institution, online lenders tend to have higher approval rates and faster overall turnaround times. Many online lenders can have the money in your account in as few as 24 hours, especially if you’re taking out a small $300 loan.
Just make sure you thoroughly vet the online lender by checking their standing with the Better Business Bureau. You may also want to ask for references, and even compare quotes and rates from multiple lenders.
The application process for a payday loan is much simpler than with other loan types.
You’ll need to provide a government-issued ID, proof of income, and show statements from an active checking account. You’ll also need to provide your social security number, be at least 18 years old, and prove that you live at the address you’ve provided on the forms.
This page provides excellent examples of some of the easiest payday loans that you’re likely to be approved for.
You’ve Mastered How to Get a Payday Loan
We hope this post has taught you that understanding how to get a payday loan isn’t nearly as difficult or as intimidating as you may have feared.
Always take the time to research your lender, never borrow more than you truly need/can afford to pay back and ensure you’re using the loan for the right reason.
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