1. What happens if I cannot pay and what are your collection practices?
Since BridgePayday is a company that connects borrowers to a vast network of lenders, not a lender itself, we won’t force you to pay up. The one who has the ability to impose penalties or even take possession of your car (in the case of a car title loan) is your lender. Nevertheless, most lenders prefer that you pay your loan back with interest rather than taking your car or other collateral.
Based on the information you provide when applying for a loan, BridgePayday connects you to a payday, car title, consolidation or installment loan lender to help you complete the process and get the money you need. The lender will need you to sign some loan documents detailing your loan amount and when it must be repaid. Those documents will also explain all types of penalties and fees you may have to pay if you do not repay the loan on time.
Payday loan repayment
- If you have borrowed a payday loan, you should repay it when you get your next paycheck. Payday loans should be fully repaid as one lump sum of cash and not in installments. The debt must be cleared all at once. The payment is the sum you have borrowed plus interest and, possibly, other fees.
- If you have a problem repaying the loan on time, this may prompt the lender to encash the check which you have issued to him when taking out the loan. By doing so, the lender gets his money back plus the interest, the fees and penalty for not getting the payment on time.
- If you cannot repay on time, you may also use the rollover option depending on the terms and conditions of your loan contract. It will allow you more time, usually another 30 days to repay the loan. However, the lender will probably increase the interest rate. You will also be obliged to pay processing fees and a penalty for rolling over.
The standard collection practice of loan lenders include phone calls at your home or office. If the lender is unable to recover the debt, they may start taking legal action against you. The matter may also be referred to a collection agent, resulting in additional costs for the collection.
The debt may also be added to a credit agency’s credit information file about the debtor if it remains overdue for over 60 days and the credit provider has taken steps to recover all or part of it.
2. How do I apply for a payday loan?
Application process for payday loans is relatively simple and you could apply either online or by visiting the lender’s office.
- If you choose to apply personally at the lender’s office, you’ll have to fill out an application form. You’ll need to prepare a couple of documents – an ID to prove who you are and a document proving your source of income or employment.
- Applying for an online payday loan is almost the same as above but there are two types of payday websites – online payday loan sites and lender matching sites. The first type allows the borrower to directly communicate with the lender. The second kind uses your information to connect you to the type of lender you need.
Once the loan application is processed and the borrower’s details verified, the borrower can obtain his loan. The money can either be handed to him in a check or directly transferred to his bank account.
3. Which states allow payday loans?
18 states and the District of Columbia restrict extremely high-cost payday lending.
Some states fight high-cost credit using several legal strategies:
- The state of Georgia prohibits payday lending as a violation of racketeering laws.
- New York and New Jersey also prohibit payday lending through their criminal usury statutes and put a limit on 25% and 30% annual interest rates respectively.
- The Arkansas Supreme Court ruled in 2008 that the state Check Cashers Act that authorized high-cost payday lending violated the state’s constitutional usury cap. That led to a halt of almost all payday lending due to enforcement by the Attorney General and private litigation. In 2010, it was voted in favor of a 17% annual rate cap for consumer credit under the state constitution. In 2011, the Arkansas legislature completely repealed the Check Cashers Act.
- Payday lending is not specifically authorized and therefore de facto prohibited by several state small loan rate caps. These are the states of Arizona, Connecticut, Maryland, Massachusetts, North Carolina, Pennsylvania, Vermont, West Virginia, and the District of Columbia. Of those jurisdictions, the District of Columbia, Arizona, and North Carolina repealed their payday loan authorization laws.
- Five other states permit loans based on checks held for deposit but at a lower rate than typical payday lending. The state of Maine caps interest at 30% for small loan companies, but permits tiered fees that result in 261% APR for a two-week $250 loan. Oregon permits a one-month minimum term payday loan at 36% interest plus a $10 per $100 borrowed initial loan fee. As a result, a $250 one-month loan costs 154% APR for the initial loan, and 36% APR for any subsequent loans. New Hampshire caps payday loan rates at 36% APR since 2009. Ohio caps rates at 28% APR since 2008. Ohio voters in late 2008 soundly rejected an industry ballot initiative to restore 390% annual rates. Montana voters passed a ballot initiative in 2010 to cap small loan rates at 36% APR, effective in 2011.
- Colorado amended its payday loan law in 2010 and defined a minimum six-month term for loans based on unfunded checks held by the lender. A payday loan in Colorado may include charges of 45% per annum interest, a monthly maintenance fee of 7.5% per month after the first month and a variety of finance charges, with 20% for the first $300 borrowed, and an additional 7.5% for amounts from $301 to $500. Loans can be prepaid at any time or repaid in installments or one lump sum.
On the other hand, there are 32 states that authorize high-cost payday lending. They have enacted safe harbor legislation for payday lenders and have permitted loans based on checks written on bank accounts at three-digit interest rates, or with no rate cap at all. These are the states of Alabama, Alaska, California, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin and Wyoming.
4. How much can you lend me?
The maximum loan amount depends on a couple different factors. First of all, it depends on your state of residence because the legislation concerning payday loans varies from state to state. Secondly, it depends on your monthly income and how much you can afford to repay. But if there are no limitations, the loan amount may be over $1000.
5. Do I need to have a job to get a loan?
When applying for a payday loan, your lender would like to know whether you have a stable source of monthly income. The usual source of money is a job and employment can be verified by providing recent paychecks. On the other hand, employment is not necessary as long as you have another regular source of income. This is important for your lender because it assures him that you are in a financial position to make repayments promptly.
6. When do I have to pay back the loan?
Payday loan is a short-term loan that is due on your next payday. This means that you have to repay your loan as soon as you receive your next paycheck. Otherwise, there are several options – your lender may encash a pre-dated check you have signed or he may transfer the amount directly from your bank account. That depends on your contract. Another option is the rollover. If you choose this option, you will get an extension of the repayment period, but it will also increase the interest rate and will add a rollover fee to the total amount you have to repay.
7. Can I pay back early?
All loans can be repaid early, but some of them have early repayment charges or fees. Paying back a loan before the end of its term may seem like the right thing to do, but you need to be aware that there may be charges associated with that. This may be variously referred to as “early repayment charge”, “early repayment penalty”, “early redemption fee”, “redemption charge” or “financial penalty”.
There is no amount set for an early repayment charge, but it is usually equivalent to one or two months’ interest. The earlier you repay the loan, the higher the charge. That’s because the interest component of the loan repayment makes up a higher proportion of the repayment. This can add a considerable cost to the loan.
If you think you’ll be able to repay your loan before the end of its term, then you must look for loans that don’t apply an early repayment charge. Also remember that if you move an existing loan into a debt consolidation loan, you will still be liable for an early repayment penalty.
Why should I choose bridge loans?
A bridge loan is a short-term loan created to offer temporary financing until a more permanent form of financing can be obtained. They are usually used to finance the purchase or renovations of real estate properties.
Advantages of bridge loans
- One of the most important advantages of bridge loans is that the financing they provide is strictly short term. Other loans usually aim towards long-term expenditures such as mortgage and college tuition which require the borrower to pay the loan off over a long period of time. That makes it more likely that the borrower will suffer from some form of financial instability that will make repaying the loan difficult. Bridge loans, on the other hand, should be repaid in full by the time long-term form of financing is secured.
- Another major advantage of bridge loan financing is the ability to choose between repayment options. Borrowers can choose to repay before the permanent financing is secured or after. In the former case, the payments are structured so that they allow the borrower to fully repay the loan over a certain limited period of time. If the borrower pays on time, his credit rating will improve significantly, allowing him to qualify for long-term loans they would otherwise be ineligible for. In the latter case, a portion of the permanent funding is used to repay the bridge loan.
Alex is a former budget manager turned entrepreneur. He works mainly at home on his credit score advice website and writes a financial blog on the side. He hopes to expand his business into a full online lending company for bad credit as soon as he gets enough investors.