When you’re in a bind and need money quickly, a payday loan might just save the day. Taking out a loan isn’t always an ideal solution. But when money is tight, a loan is sometimes the only solution.
A payday loan is a short-term loan that usually carries a high-interest rate. Amounts are generally for $500 or less, and repayment is due the next time you’re paid. That’s why it’s called a payday loans – you repay the loan on your next payday.
If you’re considering a payday loan, here’s some information you should know.
1. Some states put a limit on the amount you can borrow. For example, loans in Missouri are limited to $500. And payday loans in California have a $300 limit. But in Idaho, you can borrow up to $1000. If you need more than what’s allowed, then you’ll have to find another alternative.
2. You’ll likely have to repay the loan all at once. When you borrow from a bank or credit union, you’re allowed to make payments over time. With payday lending, repayment is usually due in full on your next payday. And unlike with a bank or credit union, you usually won’t have months to repay the debt. Most loans require repayment within two to four weeks.
However, your state might have laws that regulate payday loan repayment. For example, some states stipulate that these loans are repayable in monthly or weekly installments. And in some locations lenders can renew payday loans. When a payday loan is renewed, you can pay any fees due and the lender will extend your time to repay the original amount.
3. In order to repay the debt, you’ll need a post-dated check or a checking account. You’ll give the post-dated check to the lender for the amount of the loan. The lender will cash the check when your payment is due.
Your second option is to give the lender permission to debit the funds from your checking account. The lender will then take the funds from your account when your payment is due.
If you repay the loan before the due date, then the lender isn’t legally allowed to cash the check or debit your account.
Is Payday Lending an Option in Your State?
Payday loans aren’t legal in every state. States such as Arizona and Georgia prohibit payday lending. And in some states that allow payday lending, such as New Hampshire, interest rates are capped. Payday lending laws can get complicated. It’s best to contact your state’s consumer protection office, state regulator, or attorney general if you have questions about payday lending in your state.