Payday Loan FAQs
How do payday loans work?
Each lender is different in their terms and agreements, so be sure to check with the lender you choose for specifics, but basically they work by first checking certain records (usually not a credit check) to make sure your reported income is true and viable and that you do not currently have an excess of payday loans out. Once you are approved, they will deposit the loan amount you want into your bank account for you on the promise that you will pay it back after a certain period plus a fee. The fee is usually broken down to X number of dollars per $100 that you borrow, so if you borrowed $300 at $15.00 per $100, for example, at the end of your loan period you will be expected to pay back $345.00. For this small amount, you get everything you need to make payday tomorrow.
Is it possible to extend my loan?
Most lenders will allow you to extend your loan for another period or cycle if you pay the fee at the due date at the end of the first cycle. Using the example given above, if you had a $300 loan out and were expected to pay the $345 on your next payday but couldn't, you could pay just the $45, and wait until the next pay date to pay the full $300 you owe plus another $45 fee. Most lenders have strict limitations on the number of times you can extend a loan like this.
How are loan repayments handled?
Often with a check you will write to the lender for the full loan amount plus the fee that they will deposit in your bank on the agreed-upon date. Some lenders will, when you sign an agreement for the loan, also get an agreement to initiate reversals to your bank account and will take their payment that way, by simply "withdrawing" money directly from your account.
How long will I have to repay the loan?
That varies by lender. Most lenders offer a range of period that you can agree on to pay back the loan ranging from one week to several months. Usually the longer you take a loan for, the more expensive it will be. There is no penalty for paying your loan off early if you can, but there is usually no benefit either other than your own peace of mind.
What are the eligibility requirements for a payday loan?
It differs between lenders but usually the requirements are:
- Must be a U.S. Citizen
- Must have a job with verifiable income of at least $1,000/month
- Must be at least 18 years old
- Must have a valid savings or checking account in good standing. Most lenders will not deposit funds into an account that has a negative balance.
