Payday Loans Direct Lender | Should You Consider a Payday Loan?
Ready access to cash has rarely been more important than it has now, in the Era of Coronavirus, when nothing seems certain except uncertainty.
COVID-19 cases are surging. Economic re-openings are stalled or being scaled back. Unemployment is high, but federally backed jobless benefits are set to end July 31.
Even in robust economic times, nearly three-quarters of Americans report they live paycheck-to-paycheck, and 30% of adults say they have no emergency savings at all.
So what happens if your household budget is in a coronavirus beatdown and the car throws a fan belt, the water heater springs a leak, or one of the kids winds up in the emergency room with a sprained knee?
Absent rescue by a rich and generous uncle, you may find yourself in the market for the financial patch job available through a payday loan. You’ll have plenty of company: The Community Financial Services Association of America reports approximately 12 million American households use small-dollar loans each year, and that 96% of borrowers describe such loans as useful.
What is a Payday Loan
Payday loans are designed to get fast cash — often within 24 hours — to consumers who find themselves temporarily short for one reason or another.
Because lenders and precise terms vary, it’s wise to shop around. Know upfront, however, that you’re probably not getting into an installment loan that will be repaid over time. Generally, the principle and interest must be repaid from the borrower’s next paycheck — thus the “payday” monicker.
To seal the deal, oftentimes borrowers must provide the lender with a post-dated check to cover all the costs associated with the loan, making repayment automatic.
Under certain circumstances, it’s possible to score a payday loan with a longer term; much depends on the lender, the amount of the loan, and your income.
Keep in mind, payday loans are for budgets in crisis. They’re for fixing a car, not buying one. They’re for mending the roof, not financing a house.
Payday loans are best regarded as a one-off, a fast and simple way to get yourself upright again when you’ve had a bad financial break. They’re for pressing necessities for which you have no other access to relief, not for luxuries.
What’s the Latest on Payday Loans?
As in any financial transaction, it’s best to understand the rules, the terminology, and the bottom-line expense. Know as well, however, you’re not in this alone.
In July, the Consumer Financial Protection Bureau eliminated a pivotal provision of proposed regulation the agency’s chief said would have driven a wedge between consumers and lenders.
The Obama-era proposal required lenders to verify borrowers’ incomes to help ensure their loans could be repaid, which sometimes are laden with annual interest rates as high as 700%.
CFPB Director Kathleen Kraninger said in a statement the bureau’s action was designed to “ensure that consumers have access to credit from a competitive marketplace, have the best information to make informed financial decisions, and retain key protections without hindering that access.”
At the same time, the bureau said it was moving ahead with a proposal that restricted lenders’ ability withdraw funds from borrowers’ bank accounts.
The bureau noted “robust protections” against unfair, deceptive, and abusive acts or methods for small-dollar borrowers mandated under the Dodd-Frank Act, the CFPB’s 2017 payment provisions, and other federal and state laws.
Easing the encumbrances on small-dollar loans, the agency said, was especially important for consumers “who may have a particular need for such products as a result of the current pandemic.” Meanwhile, the bureau it “will continue to monitor the small-dollar lending industry and enforce the law against bad actors.”
While those words are reassuring, keep in mind the CFPB and state laws cannot have everyone’s back at all times in real time. It’s better to avoid trouble in the first place. Seek lenders with integrity whose terms are straightforward and affordable.
What’s the Upside?
- Easy application: Plenty of payday and other small-dollar lenders let you apply online, meaning you can apply at any time. The process takes almost no time at all.
- The criteria tend to be minimal. You must:
- Be at least 18 years old.
- Have a Social Security number or other government-issued identification.
- Have proof of a regular job or other steady source of income.
- Have an active bank account.
- Speedy cash: It’s not unusual to have your application approved immediately, and cash deposited in your bank account the next day.
- Liberal approval terms: If you meet the terms outlined above, approval is almost certain.
- Minimal credit checks: Payday lenders who check credit reports perform “soft” reviews that won’t dent your score.
- Variable amounts: While some payday lenders have minimums — you must borrow a certain amount — others are flexible.
What’s the Downside?
- High interest and fees: For lenders to make a decent return on a short-term loan — and mitigate gambling on high-risk borrowers — the rates and fees tend to be steep.
- Punishing late penalties: It’s important to be absolutely certain you can meet the payment deadlines.
- Access to your bank account: Payday lenders often require the ability to make deductions from your bank account.
- One payday loan can lead to another, and another: If satisfying a payday loan leaves you too little money to make it to your next payday, you might think of starting the cycle all over again. Too soon, you’re working for the payday lender, and not yourself.
As the watch commander on Hill Street Blues always told his troops, “Let’s be careful out there.” Know your options. Do your homework. Understand the pros and cons of payday loans. Research your potential lender(s). Have a good handle on your endgame strategy.
Under the right circumstances, a payday loan might be just the resource you need to make it through one of those budgetary hiccups that happen to the best of us — and that the Era of Coronavirus makes all the more likely.