You’ve been putting off your car repair, home repair, or some other type of bill for a while now. You know you need to get it taken care of soon, but with your current cash flow, you can’t pay for it immediately. You consider taking out a loan from your bank or credit union and think that might be the best option. After all, they likely won’t charge you a lot of money and will work with you if things are tight financially. But something stops you; the idea of getting a loan from a “payday lender” sounds terrifying. How much could these lenders charge? Are they even legal? What should you do? These are all valid concerns regarding payday loans — especially since there are many fake “payday loan” sites out there designed to steal your personal information and money. However, if you understand exactly what these loans entail and why someone might take them out voluntarily, then you can make an informed decision about whether or not this is something that could help you in the long term.

What are Payday Loans?

A payday loan is an “installment loan” where you pay out a certain amount of money and pay it back with interest later. Most people use this for unexpected expenses, such as needing to replace their car’s transmission or paying for medical bills. Payday loans are one of the most common types of “debt relief” in the United States, with approximately 90 million people taking out one during their lifetime. You can get these loans from many places, including traditional brick-and-mortar “payday loan stores” or online lenders like Lending Club or Prosper. The amount of money you can get varies, but you will have to provide proof of your employment (such as a paycheck stub or your W-2) and proof of your identity (such as a government-issued ID). Once you’ve provided these things, you should know how much money you can borrow within a few hours.

How do payday loans work?

Payday loans are “unsecured,” which means you don’t put up any collateral to secure your loan. Instead, you pay the money back in installments over a few months — with a big chunk due at the end of the term (aka your “payday”). To get this type of loan, you’ll likely have to show proof of your employment and some way to show you’ll be able to pay back the money over time. If you don’t have any collateral, your credit score and ability to promptly pay the loan will be the deciding factor.

Why Do People Take Out Payday Loans?

The idea behind taking out a payday loan is that you have a quick, easy way to get a chunk of cash right now — and then pay that money back on a specific date. It can be helpful in a few different situations; If you need cash right away — Unfortunately, life often comes with expenses that need to be paid immediately, and you don’t have the funds available at that moment. Who can put off car repairs, medical bills, and other expenses for a bit? But taking out a payday loan can get the funds you need fast. If you want to avoid bouncing a check — If you’ve been trying to pay your bills and expenses on time, but the money isn’t quite there yet, you might be tempted to “skip a payment.” However, doing this can negatively impact your credit score since it’s essentially a form of “bankruptcy” for bills.

Is a payday loan secured or unsecured?

Before getting a Payday loan Online, you’ll have to provide proof of your identity and employment. Once you have this information, the lender will look at your credit report and other factors to decide how much you can borrow. If your credit score isn’t high enough, you’ll likely have to provide a “guarantor” (someone who will sign on loan with you). Many payday lenders offer “guaranteed approval” if your credit score isn’t high enough. You’ll get the loan amount you applied for, even under $100. In these cases, you’re likely taking out an unsecured loan. This type of loan doesn’t require you to provide collateral, but it does come with significantly higher rates. Using a credit score company like Experian to check your score is a great way to determine what type of loan you can get.

Safer ways to get fast cash

As you can see, payday loans are a quick, easy way to get cash fast, but they also come with a high-interest rate. It could be a lower-cost option if you have a credit card or a line of credit you can access. – Get a high-interest loan – If you’ve got a family member or friend willing to cosign for a loan, this can be a safe way to get fast cash. Make sure you’re paying the loan back on time every month. – Use a credit card – Credit cards come with their own set of risks and rewards, but in a pinch, this can be a fast way to borrow money. – Get a line of credit – If you have a line of credit with your bank or credit union, this is likely a lower-cost option than a credit card.

The Good Things About Payday Loans

– They’re easy to get. You must provide proof of your identity and employment, and they’ll let you know if you qualify within a few hours. – who can use them to pay off higher-interest debts. Since you have a specific date to pay off the loan, it makes them an excellent way to tackle a higher interest rate debt like a credit card.

How long do payday loans stay in the system?

You will likely have to provide a few pieces of information when you apply for a payday loan. Most lenders will want to see your driver’s license and proof of employment and may also request access to your credit report. It can help them decide which loan amounts you qualify for and whether or not you’re likely to pay the loan back. As soon as you begin making payments on the loan, your credit report will be updated to show that you repaid the loan in full. It means the loan will drop off your credit report after a year.

The Bottom Line

Payday loans are easy to get cash quickly but come with high-interest rates that can quickly spiral out of control. If you’re looking to borrow some quick cash, it’s best to explore other options, like a credit card or a line of credit, first to see if they’re a better fit. If you think a payday loan might be the right choice for you, make sure you understand the terms and have a plan to pay it back as quickly as possible.