Payday loans online are short-term loans, generally for $500 or less, typically due on your next payday. Depending on state laws, payday loans may be available through storefront payday lenders or online.
Payday loans are only for some. They can cost you much more than expected if you cannot pay them back on time. Before you request one, you should understand how they work and the risks you may be taking.
The loans are for small amounts, and most states set a limit on payday loan size. $500 is a common loan limit, although limits range above and below this amount.
A payday loan is usually repaid in a single payment on the borrower’s next payday or when income is received from another source, such as a pension or Social Security payment. The due date is typically two to four weeks from when the loan was made. The specific due date is set in the payday loan agreement.
To repay the loan, you generally agree to have the amount withdrawn on the due date for the full balance, including fees, or you may provide a check ready to be cashed. The lender can cash the check or electronically withdraw money from your account.
A payday lender generally only considers your ability to repay the loan while meeting your other financial obligations.
The loan proceeds are provided to you by electronically depositing into your account.
Other loan features may vary. For example, payday loans are often structured to be paid off in one lump-sum payment. Some state laws permit lenders to “rollover” or “renew” a loan when it becomes due so that the consumer pays only the fees due, and the lender extends the loan's due date. In some cases, payday loans may be structured so that they are repayable in installments over an extended period.
Many state laws set a maximum amount for payday loan fees ranging from $10 to $30 for every $100 borrowed. A typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate (APR) of almost 400 percent. By comparison, APRs on credit cards can range from about 12 percent to about 36 percent. In many states that permit payday lending, the loan cost, fees, and maximum loan amount are capped at the same 36% maximum as credit cards.
Some states do not have payday lending because the state’s laws do not permit these loans or because payday lenders have decided not to do business at the interest rate and fees permitted in those states. In states that do permit and regulate payday lending, you may be able to find more information from your state’s website or state attorney general.
There are some fundamental requirements that you need to fulfill to request a payday loan:
Most people repay their loans with a single payment on their next pay date. Before agreeing to your loan, you need to verify the exact repayment date with your lender.
Depending on your direct lender, you may have a couple of ways to pay your loan:
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An online payday loan can solve an urgent need for money in emergencies. If you have other options to get quick cash, you should use them. If not, then a payday loan may be a great solution. If you have checks that bounce, the $35 per check NSF fees will likely be more significant than your loan fees. Or if a utility bill is becoming overdue, the fees, penalties, new deposits, etc., will far exceed your loan fees. However, always look at all options before requesting a payday loan.
Depending on your qualifications, you can borrow any amount up to your state’s defined loan limit. Your initial loan limit is established based on:
Your loan will be due on the date outlined in the loan agreement. The due date depends on several factors, including when you have your next payday. It is also often regulated by state laws. Be sure to understand your due date and be comfortable that you can repay the loan when it is due.
With no prepayment penalty, you can prepay your loan in full before the due date.