12 Tips for First-Time Payday Loan Users
A payday loan is a convenient financial service that allows you not to make the necessary purchase right away. After all, not everyone manages to save the necessary amount for an important purchase. However, before you take on loan obligations, you must carefully weight the pros ad cons and consider everything.
Let’s look at 12 tips that will help potential borrowers apply for a payday loan.
Understand the nature of a payday loan
A payday loan does not duplicate a bank loan: shorter loan terms, smaller amounts, accessibility to consumers who have a bad or zero credit history. And most importantly, a payday loan is considered an “ambulance” tool. That is, it is “fast” cash for solving short-term financail problems. If you need a larger loan for a longer period, check out other options if you need cash now.
Compare loan offers
Today, financial institutions compete with each other – use it! Many lenders offer more favorable conditions for their clients. However, the situation changes daily, and one of the lenders may offer a loan at a lower interest rate. Experts advise comparing offers from at least four lenders. Feel free to ask for a payment schedule, clarify the requirements for the borrower and the necessary documents.
How to choose the right lender? In order not to waste time searching for a lender, we recommend using the help of loan referral services. They have a network of legal organizations that issue online loans quickly. All lenders included in the network are licensed and have a good reputation. You can apply 24/7 in a few clicks – for this, you only need to fill out a short application form:
Find out borrower requirements
To get a loan, the user is required to provide some personal information: name, age, phone number, email, home address, SSN, etc.
The lender will surely check the following items:
- Having a job. The most important criterion that determines the solvency and financial stability of the borrower is also a stable income.
- Age. Young people under 20 are more likely to get rejected due to a very young age. Pensioners (over 70 years old) are also considered risky ydue to insufficient security.
- Credit history. Bad credit history increases the chance of loan rejection, or the lender sets more stringent conditions.
- Citizenship. From a legal point of view, it has been proven that it is easier for US citizens to get a loan, but a payday loan is also issued to those who have a residence permit.
- Criminal record. People with a criminal record are classified as an unreliable category, so such people will need to confirm their ability to pay.
Each lender has its own “hidden” criteria that are not announced to customers. For example, one lender gives loans to absolutely everyone, and another does not work with pensioners or students, although they have the opportunity to get a loan. In addition, there is an unofficial black list of borrowers.
Do not make a mistake when filling out the form
Practice shows that in most cases a person needs to indicate the following information when applying for a payday loan:
- Social Security Number;
- Current place of work and income size;
- Marital status, presence or absence of children.
- Contact information.
- Applicant’s property (optional).
In some cases, additional information is required – the presence of other loans, total work experience, and so on. Make sure you make no errors when filling out an application form, Otherwise, you will get rejected for a loan.
A smart borrower gets a good loan
A lender wants to give you a loan as much as you want to receive it. If you apply for a loan offline, be confident. Ask a specialist questions about the terms of the loan: about payment methods, commissions, interest rate, and the possibility of early repayment. Thus, you will create the impression of a competent borrower and the lender will not have the idea to offer you a more expensive loan product.
Provide all loan documents
Payday loan requirements are usually relaxed. Borrowers only need to provide the following documents:
- social security number;
- driver’s license;
- other state-issued I.D.
- proof or verification of income from a job or other source.
Other documents may be required depending on the loan product. For example, for a bad credit loan, the list can be quite impressive.
Loan payments must not exceed 50% of your monthly income
If you have several loans, then the monthly amount of payments on all loans should be ½ of your salary. Otherwise, you will not be able to repay old loans and get new ones. Ideally, lenders prefer a debt-to-income ratio lower than 36%.
Learn how to boost your approval chances
We share some recommendations on how to increase you loan approval chances:
- Find a job with good earnings – this does not have to be a very high-paying position, the main thing is to work for more than 3 months.
- Reach at least not the minimum age for getting a loan. Some lenders are ready to give loans to consumers who are at least 18 years old.
- Close existing debts – any loans, leasing and debts in pawnshops will definitely affect the decision of a specialist, so get rid of them.
- Be sure to open a personal bank account before applying for a payday loan online.
Attention! Do not contact companies that are ready to “clean” your credit history for a fee. Such a service does not exist, the only sure way to improve your credit score is to take out payday loans and repay them on time (not necessarily ahead of schedule).
Understand how much you will need to repay
This total loan cost includes principal, interest, insurance (if applicable), and loan costs. Overpayment should be given special attention. It does not require knowledge of banking or higher mathematics. Finding out the amount of overpayment is easier than you think: just ask for the estimated payment schedule and do some elementary arithmetic. Namely, sum up all payments and subtract the amount of the loan issued. The number obtained as a result of the calculation is your overpayment.
Remember that at the time of signing the agreement, the payment schedule may differ significantly from the schedule that you were given at the preliminary consultation. Before signing the loan agreement, we recommend checking the initial and final schedules, as well as the offers of competitors. If payment schedules differ or loan conditions change, feel free to interrupt the process and go elsewhere.
Think about whether you need paid services
A loan specialist may offer services like life insurance, debit cards, and more. Think about whether all this is necessary, but do not immediately refuse, ask about the conditions, nuances, risks, etc.
If you are told that your application will be rejected without purchasing insurance, don’t believe it. Have you checked how much you have to repay? Be sure to read the contract carefully. There may be a discrepancy in the figures. Some lenders charge a fee for SMS notifications. Feel free to refuse this service. Also, check for late payments. Keeping track of this is extremely important, situations are different, for example, you may repay the loan on time but this money will not be transferred to the lender’s account due to technical problems.
Don’t hide from the lender
It is strongly not recommended to use the services of so-called “debt cleaners”. With such interaction, the client only loses money without getting anything in return. Avoid such pseudo-helpers that offer to fix your credit for a fee.
If you cannot make the loan payment on time (an unforeseen life situation), you should not wait until late fees begin to accrue. It is better to inform the lender and request an installment plan or restructuring.
Know the risks of using a loan guarantor
A guarantor is an additional guarantee for a bank. Most often, its presence makes it possible to reduce the interest rate or get a higher loan amount. You need to think about whether it is worth contacting a friend with such a request because neither you nor your friend knows what will happen in the near future. But you can easily turn your friend into your enemy since the lender has the right to demand payment of the loan not only from the borrower but also from the guarantor. Guarantors can get rid of the status of a “guarantor” only through the bankruptcy procedure.
What else should you pay attention to?
Here is an additional list of factors that you should pay attention to before applying for a payday loan:
- opportunities to reduce the debt burden in unforeseen situations: restructuring, deferment, minimum fees, etc.;
- availability of government programs that allow you to get help from your state;
- penalties for late payments;
- restrictions aimed at the right to dispose of acquired property;
- analyze your debt load at the time of application;
- learn how to avoid online lending fraud.
Even if a lender actively advertises its loan offers on TV or on the Internet, this does not mean that they are available to everyone. Be sure to compare several loan offers. We strongly advise against submitting an application on every website, because the loan rejection will also affect your credit history. Instead, you’d better use online loan referral platforms that will match you with the right lender based on your current needs.
Follow the recommendations and advice given in our article. The provided information is based on the stories of other users who have experienced a failure and were able to solve the problem. We are sure that you will find a lender that will approve your loan. The main thing is patience and a positive attitude!