To get approved for payday loans you must present your driver’s license, be at least 18 years of age, show proof of wages by presenting your wage statements for the last three months. You must show proof of an active checking account.
Some loan companies do run your credit report and you must have a credit score of at least 500 to qualify for a payday loan. Your wages each week determine how much the loan company will let you borrow.
At the time you initially take out a payday loan you write a check to the loan company for the amount you borrow plus the interest. When you pay off your loan they give you your check back or will shred the check if you desire.
For example, you get a payday loan for $600.00 plus the interest rate of about $76.00 included.The loan company gives you $600.00 cash and you give them a check for $676.00. Most payday loan companies lend $100.00 to $1,000.
Why Payday Loans are Good
If you have poor credit and cannot get a small loan through your financial institution and need emergency cash quickly a payday loan company can help you. There may or may not be a credit check so even if you have a low credit score it makes no difference because our credit report by most payday loan companies is not checked. Companies that do check credit scores will not loan you money if your score is not at least 500. If you have everything in order you can get your money on the spot.
Why Are Payday Loans Bad
These short-term loans are bad if you do not know how to control your loan. You get a payday loan because you have no other option, you probably have no extra money, and no savings account. You are probably already overburdened with debt and live paycheck to paycheck. You may find that you cannot do without this money that pays your loan off so you must reloan to get our money back. You soon find yourself in a vicious cycle of payoff and reloan.
If you cannot pay your loan back all at once, many loan companies set your payback on a repayment schedule with the interest fee written into your payment schedule. The amount is divided up into three installments to be paid each time you get your paycheck. You may find, like so many other people, that even a schedule of payback is more than you can afford because your money is already targeted for other bills, so you must reloan to pay promised debts.
What Happens If You Do Not Pay Off Your Loan?
These loans are meant to be short-term loans. However, the majority of people who take out a payday loan find they are unable to pay back the loan without reloaning again each time they pay the loan off. If you are not careful with your payday loan you can get caught up in this cycle of payback and reloan.
If you fail to pay off your loan or set your loan on a repayment schedule the company will deposit your check for payment. If you do not have the funds when they deposit the check you most likely pay bank overdraft fees plus check return fees to the loan company. These fees build up quickly and you are obligated to pay them.
The police are not going to knock on your door and arrest you for failing to pay this money. However, the loan company can take you to civil court and sue you for the money you owe them. This judgment is entered into your credit report. The company can garnish your wages or levy your tax return.