Small Payday Loans

What Is A Small Payday Loan? 

Also referred to as salary loans or payday advances. Small Payday loans are typically short-term loans that usually have high-interest rates and don’t require credit checks. It is mainly available to consumers or low-income earners making less than $30, 000 per annum and have issues settling their monthly expenses including rents and utility bills.

The word “payday” implies that a borrower writes a postdated cheque to the lender for the “Payday salary” but receives some amount of the Paycheck in immediate cash from the lender.

Who Can Take A Small Payday Loan?

The eligibility criteria for a small payday loan are not elaborate. You need to

• Be at least eighteen years old
• Have an active bank account
• Provide some evidence of steady income
• Possess valid means of identification 

Once you check this list, you are qualified for a loan. This specification is according to the government’s Consumer Financial Protection Bureau (CFPB). The minimum age limit is to ensure you have legal means of livelihood. Meaning you are eligible to open a bank account for yourself and can take decisions (financial) on your own. 

The importance of an active checking account is to be able to check your creditworthiness if need be. Though in most cases, small payday loan lenders don’t make use of credit score and history before they can grant your loan request. But a checking account is a means through which you get credited for the loan and also pay back your loan when due. Valid identification is required in case you are unwilling to pay up your debts. This can lead to the lender employing a third party to ensure repayments. Small Payday loan issues are rarely taken to courts anyways.

Advantages Of Small Payday Loans

Easy and quick access

You don’t need a bank account before you can secure a Payday loan. Although, the lender still needs proof that you can pay back your debts. If you have had a similar case before and handled it well, you can show them to boost your chances. Nonetheless, it is a loan that should be paid back in two weeks or so, definitely, you do not need much verification.

It is Unsecured

It is an unsecured loan, therefore everyone has access to it. Unlike the traditional long-term loan that you are required to prove your creditworthiness beyond doubt. You also do not need to present collateral.

No credit score required

Regardless of your bad credit score or history, you can still get the loan provided you have a steady means of income.

In all, easy and quick access, fewer requirements, being unsecured, getting approved regardless of bad credit scores are the advantages of Payday loans.

Disadvantages Of Small Payday Loan

Despite the ease with which you can access the loan, small payday loans are still not without their shortcomings.

Short Time Frame

The very short time frame for repayments is a potential issue in most cases. This is because you might need a longer period before the ultimatum is reached. Since repayments are barely two weeks or at most less than a month, you might not have enough time to pay up. Worse still, another emergency bill might come up again, leading you to borrow again and again. 

It Is Exploitive 

Some lenders employ the use of unreasonable means to collect overdue debts. Meanwhile, it is considered predatory and the lender might even gain access to your bank account. This would have been impossible if you were not asked to provide your check balance or credit history as a grant requirement.

Very High-interest Rates

Compared to other types of loans, it has a high-interest rate payable on the amount borrowed. This can escalate into huge debts if left unchecked and can lead to a situation called “small payday loan trap”

The payday loan trap happens when you are unable to repay a loan and you have to borrow another to clear the debt. You might later find yourself paying more than you envisioned when the small payday loans are consolidated.

You definitely wouldn’t want to be stuck in a “payday loan trap” mess. So, you can solve the problem by taking the following precautions.

• Get your priorities right! High-interest loans first.
• You can request extended payment plans. Nonetheless, if it is not available, see if you can get personal loans.
• Get a credit union payday alternative loan or look into non-profit credit counseling.
• You can also ask friends and family for money, which is surely devoid of interest.

Conclusion

In as much as it is inevitable to have some unexpected expenses to clear before another paycheck arrives, you must reduce to the barest minimum, the number of advances you take. This will ensure you don’t find yourself in a “small payday loan trap” situation. You can achieve this by saving up for rainy days, you will have something to fall back on if the unexpected arises.