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    4 Things to Know About Payday Loans

    Payday loans can come with high fees and short terms. View a chart with state-by-state payday loans guidelines and see what alternatives you have.

    Updated October 26, 2021

    •8 min read • Leer en español

    4 things to know about payday loans

    Written by: Jamie Johnson

    Image: Concerned man talking on the phone.

    In a Nutshell

    Payday loans may provide quick infusions of cash that can help you make it to the next paycheck. But these loans come with high fees and interest rates, which could lead to “debt traps” for borrowers.

    Editorial Note: Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when posted.

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    Payday loans can seem like a lifesaver if you need cash quickly, but the high fees and short payment terms can lead to a cycle of debt.

    While there’s no set definition of a payday loan, it’s commonly a short-term loan for a small amount, typically $500 or less, that’s typically due on your next payday, along with fees.

    These loans may be marketed as a way to bridge the gap between paychecks or to help with an unexpected expense, but the Consumer Financial Protection Bureau says that payday loans can become “debt traps.”

    Here’s why: Many borrowers can’t afford the loan and the fees, so they end up repeatedly paying even more fees to delay having to pay back the loan, “rolling over” or refinancing the debt until they end up paying more in fees than the amount they borrowed in the first place.

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    How payday loans workWhat state regulations are in place for payday loans?Alternatives to payday loansHear from an expert

    How payday loans work

    Payday loans may go by different names — cash advance loans, deferred deposit loans, check advance loans or online payday loans — but they typically work in the same way.

    To take out a payday loan, you may need to write a postdated check made out to the lender for the full amount, plus any fees. Or you may authorize the lender to electronically debit your checking account. The lender will then usually give you cash.

    The loan is typically due by your next payday, generally in two to four weeks. If you don’t repay the loan plus finance charges by the due date, the lender can cash your check or electronically debit your bank account.

    Many states that allow this type of lending set a cap on the loan amount and accompanying fees. Depending on the state, companies may be allowed to charge from $10 to $30 for every $100 borrowed.

    What state regulations are in place for payday loans?

    If you’re wondering what state laws are in place regulating payday loans where you live, keep in mind that some states prohibit payday loans.

    And since there’s no set definition of what constitutes a payday loan, your state may allow for other types of short-term personal loans. If you’re wondering what restrictions are in place for what’s considered a “payday loan” where you live, take a look at this chart.

    But keep in mind when reading this chart that the interest charged is not necessarily the same as an APR. For example, a 14-day loan at 10% interest translates to 260.71% APR.

    State Finance charges Maximum loan amount Loan term

    Alabama No more than 17.5% $500 10 to 31 days

    Alaska An origination fee of $5. Finance charge that doesn’t exceed $15 or less for every $100 advanced, or 15% of the total advance, whichever is less. $500 Minimum 14 days

    Arizona Payday loans are not legal in this state.

    Arkansas Payday loans are not legal in this state.

    California 15% of the face value of the check $300

    Up to 30 days

    Colorado Not to exceed 20% of the first $300 and an additional 7.5% for any amount in excess of that balance. $500 Minimum of 6 months

    Connecticut Payday loans are not legal in this state.

    Delaware No limit $1,000 Less than 60 days

    Florida Fees can’t exceed 10%. $500 for the face value of the check 7 to 31 days

    Georgia Payday loans are not legal in Georgia.

    Hawaii Fees can’t exceed 15% of the face value of the check $600 No restrictions

    Idaho No restrictions on fees 25% of the borrower’s gross monthly income or $1,000, whichever is less Maximum of 37 months for loans over $300

    Maximum of 25 months for loans less than $300

    Illinois No more than $15.50 for every $100 borrowed $1,000 or 25% of the borrower’s gross monthly income Minimum of 13 days

    Indiana No more than 15% for less than $250; 13% for $250 to $400; 10% for $400 to $605 $605 Minimum of 14 days

    Iowa No more than $15 on the first $100 borrowed and $10 for each subsequent $100 borrowed $500 Maximum of 31 days

    Kansas No more than 15% $500 7 to 30 days

    Kentucky No more than $15 per $100 borrowed $500 Maximum of 60 days

    Louisiana No more than 16.75% $350 Maximum of 30 days

    Maine $5 for loans less than $75; $15 for loans between $76 and $249; $25 for loans more than $250 or more $4,000 No restrictions

    Maryland The state allows small loans subject to interest rate caps, which depend on the amount borrowed.

    Source : www.creditkarma.com

    How Long Does it Take to Get a Payday Loan?

    The time is takes to get your cash varies, depending on how you apply. Learn how long it takes to get a payday loan – including instant payday loans!

    Instant Payday Loans

    Payday loans can help you get cash quickly, but when borrowing a payday loan, consider the time it takes for your application process – which will vary depending on how you apply.

    Get instant cash at a payday loan store

    Receive an instant lending decision online

    Apply in minutes over the phone

    How Long Does It Take to Get a Payday Loan?

    So you have an emergency and you need cash, and you need it now. A payday loan may be the quickest way to get the cash you need. But how quickly you receive cash depends on how you apply.

    Apply at a Store

    Once you've been approved, you will typically receive your cash right away. Some stores may disperse your loan with a money order – so be sure to ask first.

    Apply Online

    When you apply online, it will usually take up to 1 business day to receive your cash. This process is a bit longer because the funds have to be sent to your bank account.

    Apply by Phone

    The process of applying over the phone is similar to the online process – count on it taking up to 1 business day to receive the cash in your bank account.

    Speedy Cash Instant Payday Loans

    Speedy Cash offers options that are not available with all payday lenders. Here's how you can get cash quicker from Speedy Cash:

    Cash at Store Pickup: If you choose to apply online and you have a Speedy Cash store near you, you can elect to pick up your cash immediately at the store – no waiting for funds to be deposited to your bank account.

    Opt+ Instant Funding: Speedy Cash has a partnership with opt+ - the provider of a Visa prepaid card – that allows you to have your payday loan direct deposited to your card. This process is subject to system limitations, but usually happens instantaneously so you don't have to wait for your money!

    Come See Our Friendly Faces: Speedy Cash has stores located across the country. Stop by to apply for a loan at one of our payday loan stores. Upon approval, we will give you your cash on the spot!

    Apply now in just minutes. Get cash as soon as tomorrow.

    Apply Now

    Source : www.speedycash.com

    What Are the Basic Requirements to Qualify for a Payday Loan?

    Payday loans are designed to be quick and easy and generally have limited qualification requirements.

    LOAN BASICS PERSONAL LOANS

    What Are the Basic Requirements to Qualify for a Payday Loan?

    By THE INVESTOPEDIA TEAM Updated August 31, 2021

    Reviewed by CHARLENE RHINEHART

    Payday loans, also known as cash advances, are short-term, low-balance, high-interest loans typically at usury rates. They are so-named because of a tendency for the funds to be borrowed on a post-dated check or account-withdrawal authorization effective on the borrower's upcoming payday.

    These loans are designed to be quick and generally easy to qualify for if the applicant has a job. They are intended to help consumers get some quick cash to hold them over until their next paycheck, hence the name “payday loan.” Payday loans are also called cash advance loans, deferred deposit loans, post-dated check loans, or check advance loans.

    KEY TAKEAWAYS

    The basic requirements for a payday loan are a source of income, a checking account, and valid identification. Borrowers must be at least 18 years old

    The application for a payday loan can be approved within minutes, but the loans come with extremely high interest rates that catch many people in a spiral of rising debt.

    Recent CFPB rulemaking removed one key provision of the original 2017 payday lending rule and left in place another.

    Basic Requirements for Payday Loans

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

    Be at least 18 years old;

    Have an active checking account; and

    Provide some proof of income as well as valid identification.

    The loan can be approved in as few as 15 minutes. In most circumstances, the borrower writes a check for the loan amount plus a lending fee, and the lender holds onto the check until a predetermined due date.

    Most payday loans are extended for just a few weeks. When the loan comes due, the borrower either pays off the loan or allows the lender to cash the post-dated check or otherwise make a withdrawal from the borrower's account.

    Recent CFPB Rulemaking

    The CFPB issued a final rule July 7, 2020, that removes a requirement of a 2017 Obama administration rule mandating that payday lenders assess a borrower's ability to repay a loan and leaves in place an Obama requirement that limits repeated attempts by payday lenders to collect from a borrower's bank account.1 2

    Leading up to the July 7 rule, the Trump administration issued proposed rules in February 2019, to revoke the mandatory underwriting provision of the 2017 rule and to delay the August 19, 2019 implementation of that rule.3 followed by a June 6, 2019, final rule delaying the August 2019 compliance date.4

    The Risk of Payday Loans

    Many borrowers run into financial trouble with these kinds of loans when they can’t pay them off when they first come due. Each time the borrower extends the loan, more fees are tacked on. Payday lenders charge a fee of $10 to $30 for every $100 borrowed, according to the CFPB. A $15 fee works out to about 400% annually.

    Payday loans are accessible to consumers with poor credit and usually do not require a credit check. About 12 million Americans use payday loans each year, and most of them do not have access to a credit card or savings account, according to the Pew Charitable Trust.

    Payday loans are risky, often leading the borrower into much worse financial condition down the road. They are banned in many states.

    Payday Loan Interest Rates

    Loan requirements should not be the only consideration for people thinking about a payday loan. In terms of annual percentage rates it is not uncommon for payday loans to exceed 500% or even 1,000%. Even though business models and regulations limit the size and duration of payday loans, these types of loans are still an expensive alternative and should be undertaken with care.

    Because of the high interest rates, payday loans are the most expensive way to borrow money. Some states have laws regulating how much payday lenders can lend and how much they can charge for loans, while other states, like New York, ban the practice of payday lending altogether. In those states in which the practice is banned, lenders often get around the regulations by partnering with banks in other states.

    Payday Loan Amounts

    Qualifying loan amounts vary depending on the borrower's income and the payday lender, although most states have laws establishing maximum payday loan amounts. Some states even limit the ability of borrowers to have multiple outstanding payday loans in an attempt to keep consumers from borrowing large amounts at extremely high interest rates. Loan amounts can vary from $50 to $1,000, depending on state law.

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