Who Qualifies for a Cash Advance Loan?
A payday loan is the easiest type of loan you can apply for. There is no credit check involved, so even if you have bad credit, you won’t be denied. There is also no collateral required, so you don’t need to be a homeowner, or even own a car. The two main qualifications you need are a steady job and a bank account. If you can provide proof of those, you will likely qualify.
Understanding the Process
Cash advance lenders are there to provide you with quick, emergency cash when you most need it. This is a financial tool for small amounts of money that can be paid back quickly. When you apply, you will need to bring a personal ID (driver’s license), your social security number, at least two paystubs, and two bank account statements. A paystub is proof of your employment, and a bank account shows your stability and intent to repay. If you apply online, the process is even simpler. You provide your employer’s name and phone number, and your bank routing number and personal account number. The lender will verify this information without all the paperwork.
The process itself is pretty simple…fill out an application, provide the requested information, and read through and sign the contract…when you’re approved the money can usually be deposited directly into your bank account, ready for you to use.
After you’ve figured out what lender to use and how to apply, the next question you should ask yourself is, “How much should I borrow?”
How Much Will You Qualify For?
Payday loans are usually based on salary, and many lenders will lend you up to the amount of one paycheck. But what you qualify for, and what you should borrow, are two different things.
As a rule, you should never borrow more than you absolutely need. Let’s say your furnace broke down in the middle of winter. It will cost $400 to repair. If you need $400, only borrow $400. Don’t tack on another $100 so you can take the family out to eat at a nice restaurant. Remember, everything you borrow has to be repaid. And because quick cash loans come with higher interest rates, you want to be able to pay it back as quickly as you can. Also, you will be charged interest rate fees on the amount of money you borrow. The higher the amount, the higher the fees.
Always Work Within Your Budget
The cash advance loan is a tool to help you get through short-term financial shortages. But even in a financial crisis, you need to remember what your ongoing expenses are. Consider our furnace example above: you need to borrow $400. Let’s say the cost of borrowing that money is $80 over a two-week period, bringing your loan total to $480. You should know what your household expenses are for the month, and whether or not your next paycheck can both pay those expenses plus absorb the full amount of your payday loan. If it can’t, you will be in the same situation a month from now…with unpaid expenses and not enough money to pay them.
So be honest with yourself. You don’t want to get in a cycle of taking out loan after loan just to pay ordinary monthly expenses. That’s an expensive way to finance your lifestyle. If you know you cannot absorb an additional $480 in one pay period, arrange with your lender to pay it off over multiple pay periods. Your interest rate fees will be higher, but it is still cheaper then defaulting on a loan or paying overdraft fees on your bank account. Plus, by creating a realistic payback schedule, and honoring the terms of your contract, you will improve your credit rating rather than damaging it.