Lifestyle

Here’s How A Payday Loan Works

October 8, 2020

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Now more than ever, Americans are looking for financial help to sustain themselves through the pandemic and economic recession.

A common answer to those who are financially struggling is payday loans – a short-term loan gives you access to cash immediately so you can cover your bills until your next pay check.

These loans are often small-dollar, high-cost loans and payments are usually made within a few weeks – so it is important to know what to do before getting one.

Before you apply for a payday loan, it is important for you to know what you are getting and when to pay it off.

How Do Payday Loans Work?

The best way to apply for a payday loan is online. They operate differently than other loans and the laws vary by each state so it is best to see online if you are even eligible.

After you are approved for a payday loan, the cash or check will be sent to you or deposited straight into the bank account you choose.

You will be given a due date to pay back the loan which is usually within 14 days or your next paycheck.

Since payday loans have such a short repayment period, the results is a much higher APR than other loans.

Even though the costs are high, roughly 2.5 million American families get a payday loan every year.

The reason is simple – many families do not have other financing options to choose from. Poor credit or no income is very common among people who apply for these loans.

Not only that, getting a payday loan is very easy. There are many payday lenders on the internet who can assist you in getting cash now.

How Much You Can Borrow Varies By State

The maximum payday loan amount varies by state because of the laws they have put in place. The average payday loan in the country is $350 with a 2-week term. The range is between $50 and $1,000.

It is best to apply for a payday loan online and have them tell you how much you are allowed to borrow according to the state you live in.

How Much Does A Payday Loan Cost?

The cost for a loan depends on the state, but here are the averages.

The fees range from $10 – $20 for every $100 borrowed. So, if you borrow $100 and the fee is 15%, you would need to pay an additional $15 on top of the loan amount. Keep this in mind – since you have to pay in 2 weeks, the 15% fee becomes an APR of almost 400%. Make sure you talk to the lender about these fees so you are fully aware of what is expected from you.

Here Is How To Pay Off A Payday Loan

Typically, you are instructed to repay the loan in one payment by the time of your next payday. Make sure you ask for specific dates from the lender and to mark it on your calendar.

There are a few ways to pay off the loan