How to Apply for a Payday Loan
Payday rich loans can be a relatively simple way to collect extra cash. An excellent use of a personal loan is to pay off high interest debts, such as credit card debts. If you can get a personal loan at an interest rate of 7 to 10% and use it to pay credit card debts with an interest rate of 19 to 26%, you improve your overall financial situation.
Unlike loans with collateral, such as mortgages or mortgages with equity, an unsecured personal loan will not receive the lowest possible loan. However, it can still be a good loan tool to use when you do not want to receive a collateralised loan, or when you miss the opportunity to do so.
Local banks or credit unions
With the advent of the internet, the sources for loans have gone further than just your local bank or credit union. A local branch of the bank or credit association where you do your usual banking business is probably payday still the best choice for finding the lowest interest rate on a personal loan. Meeting a face to face loan officer offers the opportunity to discuss the loan and view your total finances in detail.
A loan officer at your local bank may be able to propose an alternative, less expensive means of accessing extra cash, such as a credit line. If the loan officer knows your personal payday loan, he will rather give you the benefit of the doubt if you are right to be approved.
Dealing with a local financial institution usually also gets the money you are looking for in the shortest time. It is even possible to walk in, apply for a loan and get out with the money. Banks also generally offer more flexible loan conditions than bad credit sources, such as peer-to-peer lenders. The only major negative factor in dealing with traditional banks is that they usually meet the highest credit standards, often with a minimum credit score of 700.
Credit unions are generally slightly less demanding in terms of creditworthiness and may offer lower interest rates, but for the most part this only applies to their existing customers.
Another plus for banks and credit unions is that there are usually no loan costs.
Payday loan lenders
Payday loan lenders such as Prosper and Lending Club have become increasingly popular. It takes a little longer – up to a week or more – to get a loan, but these Payday loan lenders are generally easier to borrow with poor credit.
A typical credit score department is around the 640 level, and some lenders consider borrowers with credit scores as low as 600. Interest rates should be comparable to, and perhaps even a little lower than, what you could get from a traditional bank.
There could be some flexibility in the repayment terms, but most Payday loan lenders tend to offer loans with a fixed term, and the terms are often shorter than what you could possibly negotiate with a bank. While a traditional bank can extend the loan for five years, Payday loan lenders rarely borrow loans for terms of more than three years.
To apply for a loan at one of these sites, register with the site and complete a loan application, just like with a traditional bank. Most peer-to-peer loan sites require that you pay a license fee, usually from 0.5 to 4.5% of the loan amount.
Payday or Cash Advance Lenders
This is the place of the last resort for a personal loan, and it is only useful for borrowing a very limited amount of money for a very short period of time, usually one to two weeks. Still, if your credit isn’t the best and you just have to borrow enough money to cover an important bill, such as rent or electricity, these lenders offer an option.
However, it comes for a very high price. Expect to pay back up to 125% or more of what you borrow, and that’s only for flash loans. If you approach an Payday loan lender of this type, you also have to pay a hefty loan premium. The only positive points for these types of loan sources are that you can secure the loan immediately and that they usually only require proof of income instead of checking your credit score.
Tips to get the best loan
Credit scores are paramount in determining the interest rate that you can get for a payday loan, so anything you can do to improve your score prior to the application is worth it.
It also helps if you pay off your credit card balance or other outstanding loan balances as far as possible before you sign up. Make sure you have all the information you need for the credit application, including W-2 forms or payslips, address verification and documentation of all your monthly debt obligations.