Who is eligible for payday loans?
At one point or another, we all need financial assistance quickly to meet our immediate unforeseen needs. These immediate needs may take the form of medical bills and other expenses such as death in the family or car breakdown among others. Under such circumstances, you may be caught pockets empty in between paychecks. If you are short of borrowing options, payday loans can come in handy. Payday loans, also known as cash advance loans, refer to a type of short-term unsecured loan extended to the borrower and is expected to pay back on his next payday.
Payday loans take a very short time to process and be approved, allowing you to access funds instantly in your checking or savings account. These loans take a short time to mature, usually during the borrower’s next payday. Borrowers applying for a payday loan do not have to put up property as collateral as the loan is generally unsecured. This implies that the borrower does not face the risk of losing his property in the event that he defaults or delays in making payments.
The borrower can access payday loans from payday lending stores where upon maturity of the loan, he is expected to make repayment in person on the agreed date or through a more recent innovation of payday loans which allows consumers to apply for loan on an online platform. Online payday loans require consumers to complete a loan application form where upon approval, the funds are transferred directly into the borrower’s account. When the loan matures, the funds are electronically withdrawn from the borrower’s account on his next payday.
Eligibility of payday loans is quite simple as you are only required to meet few requirements to qualify for the loan.
Borrowers willing to apply for a payday loan must be 18 years or older. This means that they are in a position to make sound decisions and judgments.
Source of income
To qualify for a payday loan, employment is not necessary as long as you have a regular source of income. This acts as a guarantee for your lender, assuring him that you are in a financial position to make repayments promptly.
Upon approval of payday loan application, the money is transferred to your checking or savings account instantly. When the loan matures, money will be electronically withdrawn from your account as well. Therefore, before applying for a payday loan, you must have an active savings or checking account.
To qualify for a payday loan, you are expected to provide a valid Social Security Number or an Individual Taxpayer Identification Number.
Most payday loan lenders do not perform credit checks. This provides a rare opportunity for borrowers with bad credit to apply for this loan. However, the borrower’s creditworthiness may be used to make lending decisions such as the amount of loan to be extended or the interest rate to be charged.
Payday loans are a good deal to many.However with great advantages come drawbacks. Payday loans also have their drawbacks.
Exorbitant interest rates
Payday loans are generally unsecured. This means lenders face great risk in the event that the borrower defaults in making payments. Hence, they charge very high-interest rates which reduce the risk of potential loss.
Credit score impacts
Payday loans are typically expensive, hence it is not uncommon to delay or default payment altogether. This has a negative impact on the borrower’s credit score which would intimidate the borrowers borrowing capacity in the near future.