Applying for a Payday Loan That Fits Your Budget
With many people living paycheck to paycheck, cash shortfall is a common occurrence when an emergency arises. Whether it’s an emergency hospital bill, car repair costs, or a home appliance repair expense, these people struggle to meet these expenses that are not in their regular monthly budgets.
The solution that most seek out to resolve these unforeseen bills is applying for payday loans. A payday loan is a short-term small-dollar unsecured personal loan that can help in an emergency.
Payday loans are processed quickly, and you can get the money within minutes, the same day, or within one business day. This type of loan is enticing to people who have bad credit as no credit checks are made.
While payday loans might seem like an easy solution for everyone, they can be pretty expensive and harmful in the long run. Hidden fees and high interest rates can get you caught in a never-ending debt cycle.
Therefore, carefully evaluate your finances and the cost of the loan to make sure it fits your budget. Typically, payday loans are meant to be repaid with your next paycheck. While some lenders may offer you the option to renew or rollover the plan, this is rare.
With this being the case, ensure what you borrow, plus interest rates combined with other charges, will fit into your next month’s budget. Otherwise, you’ll be trapped in endless debt problems.
Also, it’s vital to compare your options first before you take out a payday loan. Payday loans require you to repay them in a single payment unlike other loans, such as personal loans or installment loans. This means that they are less manageable compared to other loan options.
How then can you apply for a payday loan that fits your budget? Here are the steps.
Step 1: Gather and Analyse Personal and Financial Information.
You are the most important factor in determining whether you should borrow the payday loan or not and how much you will need to borrow. If you want to apply for a payday loan that fits your budget, it’s vital to understand your finances, whether you actually qualify, and how much you qualify to get. While different states and lenders set different maximum borrowing limits, you also can decide the maximum you can afford to repay without issues.
It’s also vital to weigh whether the amount will be sufficient to meet your emergency expense. If it will, then it may be wise to take it out. However, if it doesn’t, consider payday loan alternatives or other options of raising the cash.
Also, review your monthly budget to help you understand if you can afford to repay the loan when it becomes due, plus its overall costs. The cost of the loan depends upon the state laws and the lender.
To better understand each of these factors, let’s look at each separately:
You need to check if you meet all of the requirements needed to qualify for a payday loan. According to the Consumer Financial Protection Bureau, you need to meet the following to be eligible for payday loans:
- Have a checking account in an active bank or credit union, or have a prepaid card account.
- Verify or show proof of income from a job or any other source.
- Have valid identification, such as an ID or a driver’s license.
- Be over 18 years old.
If you meet all these requirements, the application process should be both simple and swift.
Payday Loan Costs
The loan’s costs depend on the amount of money you want to borrow, the interest rate, the lender, and the state you reside in. Different states have set different costs for loans. APRs in some states can go up to 400% or more.
For example, if you live in Iowa, the maximum payday loan limit you can borrow is $500. For this, you’ll be charged up to $15 for every $100 you get. Therefore, if you borrow the entire $500, that will be an extra $75; so, in total, you’ll have to repay $575.
In addition, the annual APR, which is calculated daily, will be more than that. So, in our Iowa example, if you borrow for 31 days (the full term), the APR will be 176%.
Payday Loan Borrowing Limits
The payday borrowing limit in your state will also determine the loan amount you can get. Therefore, you must consider how much your state allows payday borrowers to get. This will help you decide on the loan amount to take out.
Most states’ borrowing maximum limits range between $300 and $1000. For example, California’s maximum limit is $300 while Delaware’s cap is $1000.
Payday Loan Alternatives
If a payday loan doesn’t seem like a viable option, you can consider some different payday loan alternatives.
Some of the best payday loan alternatives include:
- Title Loan – This is a loan you get when you give your lender your car title in exchange for cash. The amount you get depends on the value of the vehicle. You can get up to $50,000 in an auto loan. The downside of this loan is that you can lose your vehicle if you default or miss payments.
- Personal Loan – While most personal loan lenders require you to have fair or excellent credit, a few lenders tailor loans to borrowers with poor or subprime credit scores. Also, you can get a personal loan of up to $1000 from credit unions that may be willing to work with people with bad credit, depending on the financial institution.
- Borrow from Family or Friends – This is a great option if you have someone who can help you quickly and you can repay them later.
Step 2: Find a Suitable Lender and Complete the Application.
When you decide on the amount of money you can afford to borrow, approach a suitable lender to process the loan for you. Finding legitimate lenders is the biggest drawback that most people encounter.
So, to make the process straightforward, AdvanceSOS has done the due diligence for you and compiled a list of legit lenders in different states. All you need to do is fill out a form on our website and submit it. The lender will contact you with further details to complete the application.
Step 3: Review Your Loan Agreement and Sign it.
If a lender approves your application, they will send you a loan agreement. Carefully read and be sure you understand the agreement before you sign it.
The contract should contain the amount you can get, the loan costs, the APR, the fees you’ll have to pay, and more. It’s crucial to understand the full cost of the loan before you append your signature. If you find the repayment will exceed what you can afford, quit the process and find an alternative.
If there is something in the contract you don’t understand, get advice from a financial expert. Don’t sign what you don’t comprehend as it can bring you more harm than good.
Remember, you are not under any obligation to sign the document. With this being the case, if it doesn’t sit well with you, you can simply reject it.
Amanda is a senior writer at AdvanceSOS. She has more than six years of journalism experience, mostly in the finance sector. She graduated with a Bachelor’s Degree from Drew University.