Same-day approval payday loans are a short-term financial solution for anyone who needs immediate funding for an unexpected expense. These loans are offered at very high interest rates but are quick, easily accessible, and cater to people with poor credit.
Instant Payday Loans
Life is unpredictable. There are moments when you’ll be faced with an unexpected cost that you need to take care of that same day, but you don’t get paid for weeks. Sometimes, you need rapid funding options to help you solve these immediate financial problems. The simple solution is to turn that day into your payday with quick approval payday advances.
Payday loans are rapid funding options that provide the cash you need to cover immediate expenses until your next paycheck. These are short-term loans with typical borrowing limits ranging from $100 to $1,000. You can expect to repay your payday loan within two weeks to one month, but there are a few lenders who allow payday loans to be repaid over several months.
There are very few requirements to apply for these loans. Most lenders only require proof of income, a bank account, and some valid form of ID. This means payday loans provide easy access to funding for people with poor credit who don’t qualify for other types of loans.
While this might sound appealing, one major downside to payday loans is the average interest, or ‘finance charge’ (as payday lenders often call it). The average annual interest (APR) of a payday loan is just under 400%. So, it’s important that you thoroughly understand the terms and conditions of a payday loan before applying.
Top 5 Most Common Myths About Instant Payday Loans
Payday loans are incredibly popular; more than 12 million people in the US take out payday loans every year and 1.7 million borrowers in the UK. Despite their popularity, there’s still a lot of confusion about them and how they work. The following are five common misconceptions about quick approval payday advances.
Myth #1: Payday loans are a long-term financial solution
While payday loans are helpful, they’re meant to be a short-term solution to an immediate financial need. If you frequently use payday loans to cover your expenses, this can become expensive over a long period.
Myth #2: All payday loans have a standard interest rate
The interest rates for payday loans are typically high across the board, however, they vary depending on your lender and the amount you’re requesting.
Myth #3: Payday loans are only for people in a financial crisis
Although these loans are often advertised for use by people in a difficult financial situation, they can be useful to anyone who needs same-day access to cash for various reasons.
Myth #4: Only payday lenders benefit from these loans
Every loan granted is in the lender’s interest, but that doesn’t mean you aren’t benefitting as well. Payday loans can be very useful in a situation where you can’t meet the cost of your expenses and need a small, short-term loan to cover those fees and repay the money owed either by your next payday or slowly over several months.
Myth #5: Payday lenders charge hidden fees
Payday loans have additional punitive fees; however, it’s illegal for lenders to have hidden fees or conditions when signing a legal agreement. Many times, when people claim they were charged a hidden fee, it’s usually something they missed while looking at the repayment terms. So, you should ensure that you read all of the terms and charges associated with your payday loan before signing anything.
What Are The Risks Involved?
Like many other rapid funding options, there are several risks associated with payday loans that you need to be aware of before applying. The following are five potential risks of utilizing instant payday loans.
- Skyhigh interest rates: Payday loans are well-known for their exorbitant interest rates of nearly 400%. Compared to other rapid funding options, like credit cards with an average APR of under 30%, these rates can be difficult to repay.
- Potential negative impact on your credit: Payday loans won’t help to improve your credit as lenders typically don’t report your payments to credit reporting agencies. However, if you default on your payday loan and it’s sent to a collections agency, this will negatively impact your credit score.
- High potential for debt cycle: A debt cycle is when a borrower uses new loans to cover the cost of their existing debts. Since payday loans have high interest rates and a short repayment time, borrowers often find themselves taking out additional payday loans to repay the initial loan. This cycle of debt can be very difficult to escape from.
- Incur multiple NSF fees: One common practice among payday lenders is to have you sign a post-dated check for the amount you owe. When the repayment date arrives, the lender will make an attempt to withdraw the amount from your account. If you don’t have the amount available on your account, the lender could make multiple attempts to withdraw the money, and you will be charged multiple non-sufficient funds (NSF) fees. NSF fees could average up to as much as $34, depending on your location and bank.
- Some repayments are made by direct debit: If your payday loan repayment is to be made via direct debit, your lender will take back the amount owed for your loan as soon as your paycheck arrives on your account. You won’t have the opportunity to ensure that your rent, groceries, or other necessities are paid prior to paying off this debt. To avoid this, ensure that you organize a repayment plan that you can afford.
How to Manage Instant Payday Loans
Payday loans aren’t for everyone; ensuring you pay off your debts quickly requires discipline and a solid plan. As we’ve mentioned before, failing to repay your payday loan has the potential to trap you in a serious cycle of debt. A report by the Consumer Financial Protection Bureau (CFPB) found that only 15% of borrowers actually repay their payday loan debt on time, while 20% default and 64% renew at least once.
If you want to avoid landing in a situation where you’re struggling to repay instant payday loans, the following are six essential tips for managing your payday loan.
- Create a budget: Everyone should have a monthly budget; if you don’t, it’s time to create one that includes your payday loan repayment. Take a look at your income and expenses to determine how you can incorporate your monthly payment as an expense, even if it means giving up a few luxuries.
- Reduce your expenses: We all have a few monthly expenses that could be cut back on to help repay debts. If you’re subscribed to streaming services, go out to dinner often, have subscriptions for entertainment services, or use meal kits, these expenses could be sacrificed in the short term while you repay your debt.
- Find the money to pay your debt: If cutting back on your expenses wasn’t enough to make up the repayment amount, you need to consider an alternative way of finding the money. You could sell an asset, pull from your savings, or ask for help from family members to ensure your monthly repayment is met.
- Pay more than the minimum: Some payday loans are repaid over several months; in this case, you should try your best to pay more than the minimum if possible. Doing so will reduce the interest you owe on your loan and ensure you pay off the loan faster.
- Avoid taking out additional loans: So many people who take out a payday loan find themselves applying for more quick approval payday advances to cover their debts. This practice can become extremely harmful over time and will lead you into a cycle of debt that’s difficult to come out of.
- Communicate with your lender: If you’ve done everything right and have taken the necessary steps to prepare yourself for your upcoming loan payment but still have trouble making these payments, speak to your lender. You could be able to work out a way to adjust the loan payments to create a better repayment plan for your financial situation.
Other Rapid Funding Options
Payday loans are a quick and easy solution for unexpected financial emergencies. However, there are several factors involved that should be considered before applying.
Some payday lenders approve these loans without ensuring the borrower can repay their loan on time. You need to analyze your finances and determine whether a payday loan is the right option for your financial needs.
While they are an excellent option for people with bad credit who are confident in their ability to repay their loan, other options are available for those who qualify. Personal loans, credit card cash advances, and installment loans are three viable alternatives to payday loans.
In conclusion, same-day approval payday loans are a helpful tool for anyone in times of financial need, but they should be used with caution and only as a short-term solution.
