All you need to know before getting a payday loan online
- What is a payday loan?
- How can I get a payday loan online?
- What qualifies you for a payday loan?
Imagine you’re in a tight fix, say, your boiler unexpectedly spoiled, and the repair had you wiped out. You’ve already maxed your credit card for the month. No savings to dip your hands into or an emergency fund to fall back on. Your rent is due in five days while your paycheck doesn’t get paid for 12 more days. You need cash – fast.
One option you can take to raise the money for your rent is to take out a payday loan.
- A payday loan is a short term, unsecured loan you can take out with the expectation to repay with your next paycheck.
- You can use Payday loan online services to get fast cash to handle emergencies and unexpected expenses.
- Use short term loan comparison websites like moneezy.com to discover deals from lenders.
What is a payday loan?
A payday loan is essentially a short term, unsecured loan you take out against your next paycheck.
Think of it as a cash advancement which you pay back once your paycheck comes in. As a short-term loan, you repay the debt within a couple of weeks, usually not more than four weeks. The Australian law states that the lenders must not require a term shorter than 15 days, to protect you from loans with a term too short.
The loan amount is typically small, usually not more than $2000 depending on the lender, and is based on your salary after tax. A payday loan is intended to provide emergency cash to tide you till the next paycheck drops. However, the fees on these types of loans are often high, but these fees are regulated by the Uniform Consumer Credit Code (UCCC) made by Australian Securities and Investments Commision (ASIC).
How does a payday loan work?
The payday loan application is simple, fast, and straightforward. You don’t need to sign a ton of paperwork, nor your creditworthiness scrutinized before your application is approved. An application doesn’t obligate you to take a loan.
Here are the typical steps to get a payday loan:
Step 1: Go to a payday loan lender’s website to complete their payday loan application.
Step 2: Fill in personal information, such as your name, income and banking information.
Step 3: Wait for the lending decision. Usually, this doesn’t require more than an hour.
Step 4: Obtain your loan directly into your verified bank account once your loan application is approved.
As you can see, the loan application process is simple. Which means you don’t have to worry about a long, tedious process to get your loan approved.
How is payday loan different from other loans?
First, the product, a payday loan is offered by payday lenders, financial companies that advance cash to customers without asking for collaterals or references.
Second, you can take out a payday loan regardless of your credit card score. Whether you have bad credit ratings or no credit ratings at all payday lenders can still advance you some cash.
The loan amount is usually small compared to other types of loans. You can request a cash advance for as little as $200. Though, the maximum amount is capped at $2000 for most lenders. Interests on Payday loans are much higher than for most other types of credits. Hence, the faster you pay off the loan, the less you will have to pay back. The repayment is in form of a direct debit from your account or a deduction from your pay, the next payday. Therefore, the lenders require that you have a regular source of income.
That said, what’s the eligibility requirement for a Payday loan?
Eligibility for a cash advance is usually set by the lender; though in the US they are regulated by the CFPB. Therefore, you may want to check each lender’s requirements to be sure you qualify before applying.
Note that these criteria are set by the lenders to ensure you’re able to repay the loan. And, also as a form of responsible lending best practices put in place to protect you from ruining yourself financially.
These requirements are not set to discriminate or exclude you from getting the loan, but to protect those individuals who cannot afford to pay back the loan and are at risk of financial difficulties.
Here are some of the general requirements you must fulfill to qualify for a Payday loan:
- Must be 18 and above – Lenders expect you to be at least 18. This way, they are sure you’re fully informed and able to take responsibility for your financial position. But, regardless of your age, whether 18 or 50, you can apply for and get approved for a quick cash advance.
- Must have a source of regular income – You must have some guarantees that you can repay the loan. A verification of income is usually sufficient to pass this requirement. Centrelink income must not exceed 20% of this income.
- Must hand in a bank statement for the past 90 days – Most of the credit providers require you to show them your bank statement for the past 90 days. If your income is paid into more than one account, you must provide statements for each of these accounts. This information will help the credit provider know if you are able to meet the repayments of the loan.
- Australian citizen/resident only– You have to be an Australian citizen, legal resident or have a valid immigration status. Many lenders require you to provide them your Medicare number and card as well as an address verification.
- Active Australian bank account – you must have an active bank, credit union or prepaid card account. Also it must be an account with direct deposit and withdrawal features for future repayment.
- Valid phone number and email address – During the application process, you’ll be asked to provide an active mobile number and email. This is needed to be able to inform you when your application is approved.
The contacts are used to verify your information; plus, to keep in touch with you throughout your loan term.
If you meet all the requirements above, you can go ahead to apply for a Payday loan.
However, it is essential to keep in mind that satisfying all requirements doesn’t necessarily mean you’d get approved for the loan. It merely means your application can now be considered.
For instance, some online lenders require additional verification. The process involves checking your credit file and conducting an affordability assessment to be sure you can afford to repay the loan when approved.
Most customers, after getting approved for a Payday loan, soon find out they still need to apply for additional credits. Now, the question is:
Is it possible to apply for another Payday loan after getting approved for one?
Theoretically, it is possible as long as you meet more stringent criteria than the first one, which is an ASIC requirement. However, it is illegal to refinance or renew a loan in Australia.
How much does it cost to take a Payday loan?
Payday loans in matter of fact, are expensive, but the fees and charges are capped by the Government to protect the loantakers from difficult situations.
According to the ASIC, the establishment fee of a loan must not exceed 20% of the amount loaned. Also, the monthly account keeping fee is capped at maximum 4% of the loaned amount. Additionally, there are other fees like government fee, default fees and enforcement expences in case you fail to pay back the loan. Moreover, as ASIC states, it is no longer allowed to charge direct debit fees or to charge interest on the loan.
How to find the cheapest Payday loans?
Each Payday loan lender calculates how much to charge you differently. Thankfully, there are several online payday loan comparison sites you can use to compare deals from different providers.
As previously mentioned, the Australian law states that the lenders must not charge any interest on the loan, other than the establishment fee and the monthly account keeping fee.
Therefore, when comparing the costs of several payday loans, you can look at how many percentage rate of the fees, of the total loan amount. Remember that the creditors cannot require you to pay a total fee of more than 24% of the loan.
Are there risks involved in taking a Payday loan?
As with every other credit facility, you’re advised to conduct your due diligence and be sure you are well-informed about the particular loan you are applying for before signing the dotted lines.
That said, Payday loans, just like other short-term loans, have high-interest rates and short repayment terms. Hence, be sure you can repay the loan before applying.
Here are some advantages of a Payday loan:
- Payday loans are a fast, hassle-free way to get cash when you’re caught short before the next paycheck arrives.
- You don’t have to queue in the bank hall when applying for the loan.
- No lengthy, tedious paperwork to complete.
- You get instant feedback on your loan application status usually within the same day.
Finally, applying for a quick loan is a pretty fast way to get cash to tide you over, sort an emergency even if you have bad credit or no credit rating at all.