Who Are Payday Loans Made for?

who are payday loans made for


In the world of finance, quite a variety of loans are available. They include car loans, home equity loans, installment loans, personal loans, and payday loans. The type of loan that an individual obtains generally depends on circumstances in life including past and current employment status, existing assets, and past credit history.

What Are Payday Loans?

Payday loans are short-term loans for a small amount of money with a short repayment term.

They are designed for people who need cash quickly, don’t have the credit history to get it, and can’t afford to wait until payday for the money. In general, payday loans provide small amounts of cash ranging between $500 and $1,000. The interest rates are often high, and the repayment term is quite short. A variety of lenders provide payday loans. Many states have specific requirements in place that must be followed by any lender providing payday loans.

Where Does the Name “Payday Loans” Originate from?

With a payday loan, a small sum of money is advanced to the borrower with the promise to repay the amount in full with fees by the next payday. The individual who borrows the money must have employment in order to be able to get this type of loan.

Payday loans have a high interest rate in comparison to other legal bank loans. That’s because of the risk. Payday lenders offer unsecured loans up to $1000 to just about anyone, even those with bad credit scores, and even bankruptcy.

Why Does Someone Borrow Money through an Expensive Payday Loan?

In most cases, people borrow money through an expensive payday loan simply because they can’t get the money any other way. Usually, this is because they have a terrible credit rating and a poor credit history. A bad credit history develops over a long period of time during which the individual makes late payments, doesn’t pay the full amount due on a bill, or fails to make the payment at all. The may also have defaulted on previous loans, meaning that they failed to repay the debt.

An individual with bad credit may also have a sporadic employment history with long periods of no employment at all or periods of continually switching from one job to another. The lack of stability most likely affected their ability to keep up with their debt repayments. It is difficult, if not impossible, to obtain a personal loan when you have bad credit.

Who Are Payday Loans Really Made for?

Payday loans are a means to an end. They provide a small amount of cash quickly and without any fuss to individuals who can’t or prefer not to go through the traditional personal bank loan. Quite often, individuals who meet any of the following criteria apply for payday loans:

  • Desperately need cash in order to pay for emergency medical or dental treatment
  • Recently had an addition to the family such as a baby or older relative coming to live with them
  • Have no credit or bad credit
  • Have only been employed for 6 months
  • Need to pay for an unexpected car repair

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Payday Consumer Notice:

APR

The APR of a payday loan varies in each state and depends on the lender, the advance amount, fees and terms of the transaction. The APR in our network of lenders can range from 265.36% to more than 700% on 14 day terms.

Implications of non-payment

Implications of non-payment vary from lender to lender and by state regulations. If you are unable to repay your loan you may have one or all of the consequences listed below depending upon the terms of your lender. Fees may include but are not limited to: insufficient fund fees, administrative fees, late fees, non-payment fees, court costs and legal fees.

Collection Practices, Credit Score Impact

Payday Loans are due and payable in full in one payment at the end of the loan term, unless the Lender offers renewals or other repayment options. Make sure to review the terms and conditions of your lender if you fail to pay on time.

  • Late payments of loans may result in additional fees or collection activities, or both. Each Lender has their own terms and conditions, please review their policies for further information.
  • Non-payment of credit could result in collection activities and your account could be turned over to a collection agency. Each Lender has their own terms and conditions, please review their policies for further information.
  • Failure to pay your loan on time could result in your lender reporting the delinquency to a credit reporting agency. This could result in the lowering of your credit score which could make borrowing more expensive in the future.

Renewal Policy

Renewal policies vary not only by lender but also by state regulations. Every Lender has their own renewal policy, which may differ from Lender to Lender. Renewal fees vary by lender. Please review your state regulations and you lender's renewal policy, terms and conditions.