A payday loan is a small-dollar cash advance that typically ranges between $100-$1,000 and usually comes with a two to four-week repayment term. Unlike most traditional loans, payday loans will usually be due in one lump sum once your next paycheck arrives.
Furthermore, if you are in urgent need of cash and have a bad credit score, you can apply for 1-hour payday loans with no credit check, as they are typically processed within the same day of approval.
On top of that, all borrowers typically need to have to qualify is to be at least 18 years old, have a valid checking account, and be able to prove that they have a stable source of income. This makes these loans a viable option to consider when you need urgent cash injection not deal with an unexpected financial emergency such as a car repair, utility bill, etc.
However, it is important to keep in mind that these loans often come with high-interest rates and short repayment periods. As such, they should never be borrowed unless you are completely sure that you can afford them.
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How Does The Application Process For Payday Loans Work?
Applying for payday loans is a fairly simple process that can happen in one of two ways. For one, borrowers can head over to a direct payday lender at a physical storefront and fill out a loan application or apply online.
You will usually be required to bring identification and a recent pay stub or bank statement. Alternatively, you can obtain payday loans through CocoLoan, where you can apply for funding online without having to leave the confines of your own home.
The added benefit of using such an online credit service is that they effectively make it easy for borrowers to compare multiple lenders until they are able to find the ideal loan offer. In other words, you won’t have to settle for the first choice put before you, as you can review different rates and terms to find a payday loan that fits well within your current budget and needs.
Most payday lenders will typically charge you $10-$15 for every $100 that you borrow, on average. Once you find a good loan offer, you only need to sign the loan agreement, and the lender will start to process your funds.
You can usually expect to receive the cash in your checking account in as little as 24 hours. At this point, you will need to ensure that the funds you borrow are repaid in full, interest included, as soon as your next paycheck hits your checking account.
Why Should You Borrow Payday Loans?
Payday loans are a popular choice for many borrowers, especially those with bad credit, and for good reason. Some of the main benefits of borrowing these types of loans include:
#1. Easily accessible
One of the main advantages of borrowing payday loans is that they are extremely easy to access. You can apply for funding online via CocoLoan, and most payday lenders will be able to provide you with a decision on your loan application and disburse the funds within the same day, which is in contrast to traditional loans that often take time to apply for.
#2. Less-stringent eligibility requirements
Most traditional lenders tend to require borrowers to have a good credit score to qualify for funding. They also require you to present a ton of documentation when applying, but payday lenders are the opposite. You must be at least 18 years old, have a steady source of income, and have an active bank account to qualify.
#3: No hard credit checks are required
Unlike traditional loans that require you to have a good credit score, payday lenders don’t usually conduct hard credit checks. This means that you don’t need to worry about being denied approval because you have a poor credit rating. Do keep in mind that, unlike traditional loans, these loans cannot help you rebuild your credit score.
#4. No collateral is needed
Payday loans do not require you to put up any form of collateral to secure the funding you need. Unlike traditional loans, you don’t need to submit a car or a house to get approval, which makes it ideal for borrowers who may not have any form of security to submit.
However, it is important to remember that failure to repay your loan on time can potentially result in high late payment fees or your debt being sold to a collections agency.
Why Should You Be Cautious of Payday Loans?
While these types of loans can be rather quick and convenient, the problem with this line of credit is that they also come with a fair amount of drawbacks that must be considered.
#1. Extremely high-interest rates
The biggest downside of borrowing payday loans is that they can often be extremely expensive to borrow, with most of these loans carrying interest rates that can go as high as the triple-digit range.
When compared to traditional loans, it is very easy to see why borrowers who take out these loans can often find it very difficult to repay. It is for this reason that many states have imposed strict restrictions on how payday loans can be borrowed and lent.
#2. Serious consequences for late payment
As mentioned before, it is important that you make sure to repay your payday loan on time; otherwise, failing to do so can lead to a very difficult situation. After all, many payday lenders offer rollovers if you cannot pay your loan on time, but this can often result in borrowers finding themselves stuck in a debt spiral.
And considering the fact that payday loans tend to come with very high-interest rates, this can often place borrowers at greater risk of a financial crisis.
Payday loans can often prove to be a handy line of credit that can help you deal with any financial emergencies that come your way. It only takes a few minutes to fill out an application, and since you can do it all online, this makes it highly convenient as well. It is important to keep in mind that the quickest way is not necessarily the best way.
After all, these loans tend to come with high-interest rates and short repayment periods, which means that if you aren’t careful, you can end up paying the single loan for a long time. So, before you decide to borrow one, it is vital that you take the time to review your other options first such as borrowing from friends and family, applying for a 0% APR credit card, etc.
However, if you do discover that you have no other viable options left to consider, then you should make sure to only use a credit broker service like CocoLoan to apply for funding. This will ensure that you are able to compare loan rates, fees, and terms until you secure the best possible deal.