If you need quick extra money or cash between pay periods, know that you're not alone. Plenty of people find themselves in similar situations and turn to an easy financing option like a payday loan.
Payday loans can provide that cushion to tide you over between paychecks and fund those sudden emergencies. You can often apply for and receive approval within minutes, making it a fast cash option. Plus, the lender won’t check your credit, making it a bad credit loan.
Nevertheless, payday loans have some drawbacks. That's why it's essential to consider information about payday loans below before you apply.
Loan Terms
Overall, payday loans offer simple terms. They're unsecured, meaning they don't require collateral. Plus, payday loans are often called cash advance loans because they are a short-term financing option.
When talking about loans, a 'term' refers to how much time you have to pay off the loan. Loan terms can vary from weeks to decades, but payday loans are on the shorter end. Payday loans got their name because you’re expected to pay the entire loan in full by your next payday, usually within 2-4 weeks.
Because you have such a short repayment period, payday loans generally offer less than $1,000.
Interest Rates
Payday loans carry fixed interest rates, which depend on how much you borrow and/or state law. For example, the lender might charge you between $15 and $30 for each $100 you borrow. This can result in an extremely high annual percentage rate (APR) of anywhere from 400% to 780%.
The Truth in Lending Act mandates payday lenders to communicate finance charges placed on their loans. If you don’t see any mention of charges or fees in the loan paperwork, this could signify something shady.
Additional Fees
Depending on the state in which you live, you might pay more fees for your loan. Some examples of this might include:
- Late-payment fees
- Bounced-check fees
- Loan rollover or extension fees
Again, payday lenders must disclose this information upfront. Be sure it's indicated in the loan documentation.
Repayment Options/Ability to Repay
You must provide an upfront repayment method. There are many ways to do this, such as a postdated check or a bank account withdrawal.
Before deciding on taking out a payday loan, be sure you can pay it back when it's due. Failure to do so could lead to more fees assessed on the loan amount, meaning you might owe a lot more to the lender.
Payday Loan Alternatives
There are alternatives to payday loans if you need cash fast. These options include the following.
Title Loans
A title loan is a short-term cash loan secured by your vehicle as collateral. Like payday loans, title loans often don’t need a credit check, and you can receive funds quickly. Another similarity is that the term on these loans is typically 15 to 30 days.
Title loans also have higher interest rates, with some reaching an annual APR of 300%. Lenders can also charge extra fees on top of the interest rates. Another downside to a title loan is that you could lose your vehicle if you fail to repay it.
Bad Credit Installment Loans
You can qualify for a bad credit installment loan with proof of an income source. Some lenders might also want personal and financial information, along with a credit check. However, credit checks aren't always the final deciding factor. Lenders like Jora Credit look at the big picture and consider much more than your credit.
Unlike payday loans that require a lump-sum repayment, you repay an installment loan in equal amounts over a specific period, which provides more repayment stability and access to more funds. It can also help you better manage your budget.
Jora Credit: A Different Option
Payday loans can be a viable source of much-needed cash, but it's essential to understand their requirements. Besides, a payday loan isn’t a bad credit fix — more like a (very) short-term bandage.
If you need money and want to help improve your credit score and are in the market for a bad credit loan, consider Jora Credit, which offers online installment personal loans between $500 to $4,000, no matter how poor your credit. Jora also gives you the flexibility to repay your loan on your terms.
If you apply before 10:30 a.m. CT, you could receive your funds by the end of the day. For more information or to apply, learn more about Jora Credit today.