What is a Payday Loan?
A payday loan is a type of short-term personal loan given for a small amount of money (usually between $300 to $1,000). It’s meant to be paid back with the borrower’s next paycheck, which is where the loan gets its name. These types of loans are useful for those who have an unexpected bill come up or need cash for an emergency like a home repair or car problem.
How Does a Payday Loan Work?
Lenders will need to confirm income and bank account information before approving a payday loan. They also usually need to see proof of income, so they know the borrower has a way of paying back the loan.
Once the application is approved, the borrower must sign a contract allowing the lender to withdraw the payday loan amount directly from the person’s bank once their next paycheck comes in.
The borrower can get their loan funds in cash within just a few minutes. Funds can also be directly deposited to a bank account, and then spent to pay bills or as needed.
How to Qualify For a Payday Loan
A payday loan is usually relatively easy to obtain. Qualified applicants must be over 18 years old, have an active bank account, show an ID, and proof of income or employment (such as a pay stub). Those who make less than $500 per month, have had a recent bankruptcy, or already have an outstanding loan may not qualify for a payday loan.