Online payday loans are a short term loan where a lender lends a small amount to a borrower until their next payday. They are also known as cash advance loans, payday advances or instant payday loans. Online payday loans are popular among people with bad credit or poor credit who can’t get traditional personal loans or credit cards. The best online payday loans are from direct lenders who offer fast loan approval and transfer. But payday loan rates are high and bad credit borrowers pay even more due to hidden fees and late payment fees. Before taking out an online payday loan explore payday loan alternatives like credit union loans or installment loans.

Features

• Bad Credit OK. Online payday loans are marketed as bad credit loans as they are available to people with low credit score or bad credit history. Payday loan providers may not do a credit check so bad credit borrowers can get loan funds easily.

• Small Loan Amounts. Online payday loans are for small loan amounts from $100 to $1,000. Good for emergency cash needs like unexpected medical bills or car repairs.

• Fast Loan Approval. Online payday loans are known for fast approval and funding. Many payday loan providers offer instant loans or quick payday loans, some lenders approve loan requests in 15 minutes and fund loans in one business day.

• No Credit Check. Some online payday lenders do not do a credit check which can be good for people with bad credit score but may result to higher interest rates and fees.

Pros and Cons

Pros

1. Convenience. Online loans can be applied from anywhere making the loan process fast and easy. Borrowers can apply for payday personal loans or online personal loans anytime.

2. Fast Approval. Direct lenders approve online payday loans fast. Good for those who need cash now as payday advances can be approved and funded in minutes.

3. Accessibility. Online payday loans are available to people with bad credit or those who can’t get traditional loans. That’s why they are an option for many borrowers who need cash fast.

Cons

1. High Interest Rates and Fees. Online payday loans have high interest rates and fees which can be expensive for borrowers. Some payday loan providers may also charge hidden fees.

2. Debt Trap. Payday loan borrowers may get trapped in debt if they can’t pay the loan on time and will result to rollover fees and additional interest charges.

3. Unregulated. Online payday lenders may not be regulated in all states and some payday loan companies may be predatory lenders offering loans with unfair terms or hiding fees.

How to Apply for a Payday Loan Online?

1. Choose A Lender. Select a reputable payday lender whether online or physical location, make sure they are compliant with state laws and federal regulations.

2. Prepare Documents. Gather required documents such as pay stub, social security number, bank account information and proof of income.

3. Fill Out The Application. Fill out the payday loan application form with personal details, employment information and loan amount. Submit online or in person.

4. Review The Payday Loan Agreement. Review the payday loan agreement carefully, read interest rates, fees, repayment terms and due date.

5. Get Loan Funds. Once approved, get the loan funds directly to your bank account or prepaid card account, usually on the same business day.

Requirements

According to the U.S. government’s Consumer Financial Protection Bureau (CFPB), to qualify for a loan most payday lenders only require that borrowers:

1. Age. Applicants must be at least the age of majority which is 18 in most states, although some states require borrowers to be 19 or 21 years old.

2. Active Checking Account. A valid and active bank account is required for the deposit of loan proceeds and for the lender to withdraw repayments.

3. Proof Of Income. Borrowers need to show proof of income such as pay stubs to prove they can repay the loan.

4. Valid ID. Borrowers must present valid ID which is usually a social security number to verify their identity.

How to Get the Money

1. Direct Deposit. The most common is direct deposit into your bank account. Once your payday loan application is approved, the payday lender will deposit the loan proceeds into your active checking account, usually on the same business day.

2. Prepaid Debit Card. Some payday lenders offer to load the borrowed amount into a prepaid card account. This is convenient for those who don’t want to use their bank account.

3. Cash. In some cases especially with in-person payday lenders, you can get the borrowed amount in cash. But this is less common than direct deposit or prepaid card.

4. Check. A few payday lenders may give you a check for the loan amount which you can then cash or deposit into your bank account.

Payday Loan Rates

Payday loan rates usually involve fees of $10 to $30 per $100 borrowed depending on state laws and borrowing limits. A typical fee is $15 per $100 borrowed which translates to an annual percentage rate (APR) of around 400% for a 2 week loan. For example if you borrow $300 you will need to pay back around $345 by next payday. These rates are much higher than other types of loans such as personal loans or secured personal loans.

Payday lending is allowed in 37 states, 11 states including Connecticut, Maryland and New York have strict regulations or interest rate caps that limit or prohibit payday lending. Some states like Arkansas and North Carolina have repealed their payday lending laws and others like the District of Columbia have banned it altogether.

18 states and the District of Columbia have usury rate caps, often at 36% APR to curb high cost payday lending. States like Nebraska, Hawaii, Illinois and New Mexico have recently enacted such caps, which is a growing trend to regulate payday loan rates.

The highest payday loan rates are in states like Texas (662%), Missouri (652%) and Delaware (639%). On the other hand states like Oregon (140%), Maine (228%) and Iowa (247%) have lower rates. Some states like Washington and Virginia have additional regulations to limit the number of payday loans or extend the repayment terms to reduce the risk of debt traps.

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