A payday loan is a short term cash advance that is paid back to the lender when the borrowing party gets their next paycheck. Lenders generally charge a high rate of interest on the balance due to the particularly short nature of the loan. The name payday was attached to such cash advances because it was, and still is, a common practice to provide lenders with a post dated check which would become valid and cashable on the borrower’s next payday.
Payday loans are ideal for small amounts and lenders do not seek too many qualifying criteria from their customers, but there are still a few nonetheless and we are going to discuss all of them here. Keep in mind that these are set by the Consumer Financial Protection Bureau (CFPB) of the United States government and therefore, lenders do have a legal right to seek the following before granting any loan.
US Residency/Citizenship is a Must
Although it’s common sense, it’s still worth mentioning that unless you are a registered US citizen/resident, payday loans are not an option for you in the country. In fact, no legal financial institution operating within the nation can give you a loan until and unless you are a registered US citizen/resident, holding a checking bank account with a US bank. They will ask for ID to confirm that you are indeed either of the two, so keep your documents ready.
The Borrowing Party Must Hold an Active Checking Account
For the majority of lenders, having an active checking account is an essential criterion that the borrower must meet, because it allows them to verify a bunch of things about the borrowing party. Largely, though, the creditor is interested in checking whether the account of the potential debtor is active and whether transactions are regular.
Alongside the verification of the checking account holder’s financial status, the lender will also deposit the loan amount into that bank account with the details provided.
Once the pre-decided payday arrives, the same amount plus interest will also be withdrawn by the creditor from the same account. Aside from the checking account details and the bank’s routing number, the lender might also ask you for additional documents such as bank statements before granting the loan, but we will get into that later on.
The Borrowing Party Must Provide Proof of Income
This criterion is pretty much standard for almost any legal loan available in the United States because no lender will give money to you if they cannot determine whether or not you have a regular source of income to pay the loan back. There cannot be a payday loan, if you cannot produce proof of the fact that there will indeed be a payday in the near future!
This is also part of why a borrowing party needs an active checking account to qualify for a payday loan, but in order to prove that the given account is actually active and has a regular pool of money coming into it, you will also need to provide bank statements to the lending party.
The exact requirements may vary a bit, but depending on the particular lender, the statements should, in general, preferably prove that you have had an active source of income for at least six months or more.
The loan amount you qualify for, will depend on what your proof of income conveys to the lender in question, but since payday loans are small amounts to begin with, this is usually not a problem.
Only Adults Qualify for Loans in the US
Even if you have inherited a small business at 17, you will not be given a loan before you reach that magic number, aka 18. No minors can be given a loan due to legal bindings which are very strictly enforced by the United States government.
In such scenarios, you will require someone else with all the necessary qualifications to take the loan out for you, which is not ideal, but it is a solution when a minor really does have a credible source of income to pay it back in time.
On the other side of things, if you are older than 65, you will also have a hard time getting a payday loan as well. 18 – 65 is the general age range for such loans in most situations. There isn’t a legal stipulation directly preventing such loans for senior citizens, though, so you may find some parties are willing to give you the loan you require after searching through all your options.
Can You get a Payday Loan Without a Credit Check?
Having a high credit score is not a requirement if you are looking for a payday loan and neither does it usually affect your credit score. You can read this page on Bonsai Finance which explains the relationship between credit scores and payday loans in more detail, alongside helping you to actually find lenders for online loans between $100 and $5000.
Bonsai Finance helps people to get instant online loans in just a few easy steps and in under a few minutes, as long as they meet the universal qualifications we just discussed. Bonsai Finance connects you to lenders who allow the paying back of even small amounts via regular installments, rather than withdrawing the whole balance plus interest at once.
It is recommended that you pay particular heed to the rate of interest which the lender is charging and whether or not there is scope for the lending party to exploit the contract in some way or another. Seek a bit of financial advice, if you can, before borrowing money from any lending party, because in the rush of things people often forget to read the fine print. Although payday loans are usually not big sums, they can cost you a lot of money in interest if you are not careful, or are not diligent about paying the amount plus interest back in time.