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All About Payday Loans

While there is no universally accepted definition of a payday loan, it is typically a short-term loan of $500 or less that is repaid on your next payday. Lenders may provide payday loans at storefronts or online, depending on your state’s laws. But who are the best payday loan lenders in Washington? Read the answer at Paydaychampion site.

What Is The Cost of a Payday Loan?

Payday loan fees are typically capped at $10 to $30 per $100 borrowed under several state legislation. A standard two-week payday loan with a cost of $15 per $100 corresponds to a nearly 400% annual percentage rate (APR). On the other hand, credit card APRs can range from approximately 12% to about 30%. The cost of the loan, fees, and the maximum loan amount are all capped in many states that allow payday lending.

Characteristics of a payday loan:

The lender may send the loan proceeds to you in cash or cheque, electronic deposit into your account, or a prepaid debit card.

A payday lender usually does not examine your ability to repay the loan while meeting your other financial responsibilities.

To repay the loan, you usually write a post-dated check for the entire sum, including fees, or authorize the lender to drain funds from your bank electronically, credit union, or prepaid card account. The lender can cash the check or electronically remove money from your account if you don’t return the debt on or before the due date.

A payday loan is often repaid on the borrower’s next payday or when additional income is obtained, such as from a pension or Social Security. The loan’s due date is usually two to four weeks after approval. The payday loan agreement specifies a fixed due date.

Payday loans are modest, and several states have set a maximum lending amount. 

A usual loan limit is $500, while limitations are above and below this amount.

What if I can’t pay back a payday loan?

Depending on the lender and the state you live in, you may be charged a late fee or a nonsufficient fund fee. You may be able to extend the due date with a rollover, but this usually comes with a cost. Failed attempts to obtain payment can result in bank fees being levied against you.

The lender may forward your loan to a collections agency if the lender cannot recover the cash.

What do I require to obtain a payday loan?

A payday loan typically requires an active bank account, identification, and evidence of income, such as a pay stub. You must be at least 18 years old to participate. Some lenders also require a Social Security number.

Even if you have a job and a bank account, you may still be turned down for a payday loan. 

Lenders who offer APRs of more than 36% aren’t allowed to lend to active-duty military personnel, spouses, or dependents.

Is it true that repaying payday loans improves your credit score?

Paying off a payday loan does not usually improve your credit score. Because most payday lenders do not record on-time payments to credit bureaus, the loan will have no impact on your credit score.

However, if you do not repay the loan, you may harm your credit. The payday lender may report the default to credit bureaus or sell the debt to a collection agency, which may harm your credit score.

Alternatives to payday loans to consider

Take out a loan from a family member or a friend.

A family member may be able to locate the monies for you. You’ll save money on interest and won’t have to worry about a credit check. Make sure you agree to the loan’s terms, such as when you’ll repay it.

Check with your bank to see if they provide a small-dollar loan.

Mainstream banks are starting to offer small-dollar loans to help people with unexpected expenses.

Lending Circles

A lending circle is a group of people that lend money to each other for free or at a low-interest rate. Because lending circles typically generate money for one person each month, it’s a long-term commitment, but joining one can help you raise money for a car repair or get you through a difficult period.

Pawn Loans

A pawnshop loan is a no-credit-check option that comes close to selling your belongings. 

To receive one, you hand over anything valuable to pawnshop employees, who appraise it and decide whether or not to give you a loan in exchange for it. To get your item back, you and the pawnshop agree on when you’ll pay off the loan and any other interest or fees and when you’ll pay off the pawnshop.