Payday loans are primarily unsecured, short-term loans that don’t require a credit check.

While there is no precise, universal definition for the phrase, the United States Consumer Financial Protection Bureau states that this form of loan is often for $500 or less and is payable on the borrower’s next payday. States have different rules governing these types of quick loans. However, depending on where you live, you might be allowed to get them via a storefront payday lender or online. Borrowers in Kentucky can apply through an online payday loan application KY from Greenday.

Payday loans typically have a two- to four-week repayment period, and lenders don’t consider applicants’ credit scores or capacity to meet other financial responsibilities when accepting the loan.

How to secure a payday loan from a direct lender

To secure a payday loan, lenders frequently demand the borrower to write a personal check for the loan amount. Other details include interest and fees to be deposited later. Direct access to the borrower’s bank account is frequently required.

The personal check is held by payday lenders until the borrower’s next paycheck, direct deposit, or social security payment arrives. Some payday lenders provide long-term repayment plans. They allow them to make multiple electronic withdrawals from the borrower’s bank account. However, this depends on the terms and the rules of the respective state.

The average payday loan is for two weeks, and the loan amounts range from $50 to $1,000. Payday borrowers typically pay exorbitantly high-interest rates and costs in exchange for quick loans that don’t involve credit checks. Payday lenders frequently impose APRs of 400 percent or greater on their loans, as well as finance costs ranging from $10 to $30 for every $100 borrowed.

Most payday loans have only a few requirements: an open bank account in good standing, consistent income, and a form of identification.

Payday loans have a high default rate of around 20%, according to the Consumer Financial Protection Bureau, because little consideration is given to borrowers’ financial status or creditworthiness. Furthermore, around 80% of payday borrowers roll over or reborrow their debts within 30 days of their first loan.

Payday Loans: What You Should Know

Payday loans may be one of the only places Americans with bad credit can turn for temporary financial relief in circumstances of financial emergencies or life-or-death situations. However, due to the widespread deception and predatory behavior in the payday lending industry, the Consumer Financial Protection Bureau, the Federal Trade Commission, and other federal and state regulators have repeatedly warned Americans about the dangers of payday lending and imposed restrictions on payday lenders’ activities.

According to a Pew Charitable Trusts survey conducted over five years, 12 million Americans take out payday loans each year, with those borrowers paying $9 billion in loan costs alone.

Benefits of payday fast Loans

  • Speed is one of the benefits of payday loans. Payday loans are quick, and lenders frequently approve loans the same day or the next day.
  • The ease with which it can be used. As long as the applicant has a consistent source of income, a current bank account, and identification, getting a payday loan is usually simple. Borrowers might even apply for a payday loan online and be authorized. While some critics say that payday lending is fundamentally exploitative, borrowers’ rights are protected by law.
  • Availability. Payday loans may be one of the few possible sources of emergency cash for borrowers with terrible credit, depending on the situation.

Payday Loans’ Drawbacks

  • The price is very high. Payday loans can have yearly interest rates of 400 percent or more, with financing fees ranging from 15 to 30 percent of the borrowed amount. When compared to the about 16.17 percent national average credit card interest rate or the 4.25 percent average interest rate on a 30-year mortgage as of late February 2022, these high-interest rates stand out even more.
  • Debt is a cycle. A payday loan can easily compel the borrower to fork over the majority of his or her next salary due to interest and fees, potentially trapping consumers in a cycle of recurrent loans.
  • Harassment. Payday lenders have a reputation for taking advantage of financially weak borrowers and employing aggressive and unpleasant collection tactics.