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Just like a payday loan in person, easy payday loans online are short-term, fast cash loans to borrow money immediately. The term payday loan comes from the fact that the consumer borrows money and pays it back with their next paycheck.
These loans are referred to by many other names, including payday cash advance loans, cash advance loans, and same-day loans. The key component of payday loans, whether in person or online, is paying the loan back with the next paycheck or the high-interest rates associated with them make them cost-prohibitive.
Payday loans differ from installment loans despite the fact that both are payday advance loans. An installment loan involves a repayment schedule that extends beyond the next paycheck and is set up to be paid back within a set period of weeks or months.
It would be great if every person in the U.S. had enough money in savings to cover emergency costs, but studies show that is not the case.
The ING International Survey Savings 2019 showed that 27% of adults in the U.S. have no money at all in savings. GOBankingRates also runs annual surveys and its latest data shows that 58% of adults have less than $1,000 in savings.
In addition, many people cannot use credit cards for emergency costs because they have reached their credit limit or they do not have credit cards. Bankrate.com did a study that showed 22% of adults don’t have a credit card and that the trend is for an even greater number with only 33% of adults 18-29 owning even one credit card.
With so many adults lacking funds in the bank and not having access to immediate credit, easy payday loans online can be a solution in a pinch. The reality is that emergencies happen. Your car needs a repair out of nowhere or something happens in your home that needs immediate attention.
Maybe a bill that is higher than normal doesn’t fit into your budget. Easy payday loans online can provide you with much-needed capital quickly.
There are many potentially negative factors to consider when seeking easy payday loans online. First and foremost, payday loans charge exorbitant interest rates, averaging around 400% Annual Percentage Rate (APR). In comparison, a credit card rate of 30% would be considered very high.
Personal loans could have a low interest rate, but even for someone without a great credit score, the rate would rarely exceed 35-40%.
Customers need to be aware of what the actual cost of a payday loan is. Most payday loans range between $500-$1,000. If you borrowed $500 for one month before your next paycheck with a 400% interest rate, you would be paying back $666.67 for that initial loan.
The worst situation is being unable to pay the loan back with your next paycheck. Then you can get caught in an extremely costly, often devastating cycle. If you can not pay back the loan on time, you incur hefty fees on top of the high-interest rate and your total repayment amount escalates.
For a customer who didn’t have money in the first place, it becomes extremely difficult to pay back the loan as the costs continue to grow.
Make sure you do your research before trying to secure easy payday loans online. Several states have set interest rate limits that a payday lender can charge and some prohibit payday loans completely.
You can find out more information about your state on the PayDay Loan Consumer Information page, where you will find that 16 states and D.C. do not allow high-interest rate loans or payday loans at all.
The way some lenders in those states get around the law in their state is by offering easy payday loans online. This gives the consumer a chance to secure money quickly, but with the high-interest rates that could lead to the aforementioned devastating cycle of debt.
Online lenders are able to reach a greater number of people and benefit themselves by forcing high rates on customers, who may not be able to afford them even with their next paycheck.
Payday loans often target low-income and minority communities. A Pew Research study showed that three times as many African-Americans use payday loans as whites with a higher rate for Latino borrowers as well. Another group that uses payday loans disproportionately higher are those who are physically challenged.
The Bureau of Consumer Financial Protection (BCFP) determined in November 2017, in its Payday, Vehicle Title, and Certain High-Cost Installment Loans report, that mandatory provisions would go into effect on August 19, 2019. They recently delayed those provisions by 15 months to November 19, 2020.
The CFPB mandate would require lenders to determine a consumer’s ability to repay the loan before issuing a number of loans, including payday loans. However, some short-term loans would be exempted from the “ability to pay” determination if there are certain consumer protections.
For larger loans with an APR of greater than 36%, lenders would not be allowed to withdraw payment from a customer’s bank account if two attempts have already failed without customer authorization. Even when the lender is permitted to withdraw payment, they will be required to provide prescribed notices to the consumer.
Having bad credit often prevents people from getting more traditional loans through a bank or credit union. Easy payday loans online are literally accessible to any customer with access to the internet. As long as you can show the ability to pay back the loan, finding a payday lender is not difficult.
This is helpful for those who have steady income, but have bad credit due to past financial difficulties.
Easy payday loans online are also much faster than more traditional loans. You can secure money much more quickly and without having to meet personally, which may be an additional impediment to those who are juggling work and other obligations, particularly if they have a family.
Getting the money faster allows the customer to pay the bills they need the money for more quickly and avoid penalties or further penalties on those bills.
Although paying your payday loan on time won’t help your credit, it does help you protect your credit. If you take out a traditional loan and fall behind in payments, your credit will be negatively affected, which will further hurt your ability to secure loans in the future.
One of the first places to start, whether you are trying to get a payday loan in person or online is to find a lender accredited by the Better Business Bureau (BBB). You can see BBB ratings of payday lenders on its website. In addition to finding good ratings, you can find out which lenders to steer clear of.
Customer service is particularly important when seeking easy payday loans online. A reputable company should have multiple and transparent ways to reach them. If you send an e-mail, take note of the response time. If you call, do they answer or do they respond quickly to a voice message?
If you don’t hear back from a potential lender in a short time, you may find delays in securing your money quickly, which is why you are seeking the payday loan in the first place.
Another way to make sure you are dealing with a reputable lender is to check what other people are saying about them. Whether it is an unbiased financial website or a large number of everyday reviewers, you can vet lenders to find one you can trust in your time of monetary need.
All payday or short-term lenders are required to follow a set of rules so you can assure you are dealing with a legitimate lender. For one thing, all fees and terms of the loan must be shared with you upfront and need to be in the contract. The terms of the loan cannot be changed once the contract has been signed.
Under no circumstances should you pay money upfront before receiving the loan. If you are asked to pay any upfront fees, you know the lender is not legitimate and you should not do business with them. The basis of easy payday loans online is that you are borrowing money to be paid back later, not to be paying money in order to borrow.
One of the main benefits of securing a short-term or payday loan is that the money can be used for whatever purpose you want. If a lender tries to ask you how you plan to spend the money or puts limitations on how you can use the money, you should steer clear.
There are times you may be in a financial crunch and may be tempted by easy payday loans online, but there are several alternative solutions that will cost you a lot less money.
One of the safer alternatives to payday loans is an installment loan, which is a personal loan paid over installments. You will get significantly better interest rates than with a payday loan and will be able to pay back the loan with regular payments rather than all at once.
Making regular payments on an installment loan will also boost your credit, making securing loans in the future more of a reality.
Some lenders will do a soft check on your credit, but even if your credit is not great, they may extend an installment loan to you if you can show steady and consistent income.
Being part of a credit union can also increase your chances of getting an installment loan even without great credit if you show a history of keeping your account active.
Another option that is recommended to investigate before looking for a loan of any sort is to negotiate with your credit card companies or utility company to make installment payments of less than what is owed.
This can help alleviate some of the overwhelming bills you are facing or help you pay an emergency bill that comes up and threatens your financial security.
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