Every year, over 12 million Americans take out a check advance loan (also known as a payday loan).
Are you considering one of the loans?
Payday loans get a bad rap, but they do have some uses. Before you take one out, though, it’s important to understand exactly what they are and how you’re going to pay them back.
If you think a payday loan might be a good option for you, keep reading.
Explained below is everything you need to know about check advance loans and what you can expect during the application process.
What Are Check Advance Loans?
A check advance loan is a type of short-term, high-interest loan. These loans are usually used to help tide people over until their next payday (hence the name “payday loans”).
They’re for relatively small amounts of money—they usually range from a few hundred or a couple thousand dollars, and they come with quite high interest rates.
In fact, the average interest rate in the U.S. for this type of loan is nearly 400 percent!
Many people turn to check advance loans when they’re in a bind and need money right away. When you apply for this type of loan, you can usually get the money you need the same day on which your application is processed.
The other benefit of check advance loans is the fact that you do not have to have a minimum credit score in order to take one out.
This makes them an option—sometimes the only option—for people who have very low credit scores or no credit score at all.
How to Apply for Advance Check Loans
If you’re interested in taking out payday loans or advance check loans, the process is fairly simple. If you follow these steps, you’ll likely have the money you need in your bank account right away.
Meet the Minimum Requirements
There is no minimum credit score required to take out a payday loan. There are a few requirements you will need to meet, though, including the following:
- Be at least 18 years of age
- Have a valid form of identification (driver’s license, passport, etc.)
- Provide proof of income (check stub, bank statement, etc.)
- Have an open and active checking account
- Have a valid phone number
If you can meet these three requirements, you’re almost guaranteed to be approved for a loan.
Fill out an Application
Whether you’re applying for a payday loan in-person or online, you will need to fill out some forms.
These forms will likely require you to write down your name, address, phone number, social security number, and bank account number.
You may have to provide additional information about your employment and income, too.
Write a Check
In addition to filling out some paperwork, you’ll also need to write a check for the amount of money you’re borrowing, plus fees and interest.
You’ll post-date that check for the date on which your loan needs to be repaid. When you accept the loan, you agree that the lender can cash your check on that date.
If the check doesn’t clear, you’ll owe additional fees and will have to deal with any penalties put in place by your bank for having an overdrawn account.
Some payday lenders don’t require you to write a check. Instead, they’ll require you to give them access to your checking account so they can withdraw the money automatically on the date your loan is due.
Collect Your Money
Once all this is done, you’ll be able to collect your money. In most cases, you’ll receive the money on the same day you apply for the loan. In some cases, though, you may have to wait until the next business day.
How to Find the Right Lender
As you can see, the process of applying for a check advance loan is pretty straightforward.
There are lots of lenders out there, too, so it’s easy to find someone who will approve your loan application.
That being said, though, it’s important to be particular about the lender with whom you choose to work. These tips will help you find a reputable lender:
- Avoid lenders that charge a fee to process your loan application
- Avoid lenders that do not have a physical address (even online lenders should have a physical address somewhere)
- Make sure they abide by your state’s specific payday lending laws
- Avoid lenders with extravagant claims like “guaranteed approval”
Be sure to also compare interest rates and terms from several different lenders before you make a decision. This will help you ensure you’re getting the best loan possible.
Tips for Paying Back Your Loan
Before you take out a payday loan, it’s important to have a plan in place for paying it off. Remember, if you can’t pay off your loan, you’ll be subject to high fees and possibly even legal action.
The following are some tips that will help you pay off your loan on time:
- Don’t borrow more than you need
- Make sure you’re borrowing for the right reasons
- Avoid taking out multiple loans at one time (if you live in a state that allows this)
- Look into alternative borrowing methods for paying off the loan (personal loans, payday alternative loans, etc.) instead of rolling over the loan into another pay period
You may also want to work with a credit counselor who can negotiate with your creditors and help you pay down your debts faster.
Learn About Other Types of Loans Today
Now that you know more about check advance loans, are you interested in applying for one?
If so, be sure to keep this information in mind so you can find the right lender and increase your chances of having your loan application approved.
Do you want to learn about other types of loans besides payday loans? Do you want to learn more about money management in general? Either way, we’ve got you covered.
Head to the Personal Finance section of our blog today.
You’ll find all kinds of helpful articles there on everything from tips on getting a loan with a bad credit score to improving your credit rating.