If you’re in a pinch financially, a same-day payday loan can help you meet your immediate demands until your next paycheck arrives.
However, you’ll almost certainly pay a price for the convenience of short-term loans — payday loans are known for high fees and triple-digit interest rates. When it comes to payday loans, it’s not uncommon to pay costs that amount to roughly 400 percent APRs (annual percentage rates). Payday lenders typically give modest sums of money, usually $500 or less, with payback due on your next payday, however, terms differ by state.
Same-day funding is a selling pitch for payday lenders, but it doesn’t always imply you’ll get your money the same day as loan application. The time it takes for you to get funds varies depending on the lender.
Should I think about getting a same-day payday loan?
Payday loans should only be utilized as a last resort after all other options have been exhausted. When considering a same-day payday loan, it’s critical to examine the benefits and drawbacks. Here’s a rundown of what to consider.
Payday loans with same-day approval provide a number of advantages.
- When you need money quickly, there’s a chance you’ll get it: If you need money for a car repair right away, a same-day payday loan may be able to help you out — depending on the lender, you could obtain cash the same day or the following business day.
- There is no requirement for a security deposit: Unsecured loans are payday loans. You don’t have to put your car or personal property up as collateral, unlike a pawn loan or a title loan.
- It’s possible that bad credit won’t be a deal breaker:
Even if you have a bad credit score, you might be able to get approved for a same-day payday loan. Credit checks are not required by all payday lenders.
- Lender alternatives include:
You may be allowed to apply for a payday loan online or in person, depending on your state’s laws.
The disadvantages of same-day payday loans
- APRs and high fees: Payday lenders who promote cheap costs should be avoided since they might build up to a very high interest rate. A $15 cost every $100 borrowed is standard, according to the Consumer Financial Protection Bureau. For a two-week loan, that equates to an APR of about 400 percent. According to the Federal Reserve, the average interest rate on a 24-month personal loan was 10.63 percent in May 2019, while the average credit card interest rate was 15.13 percent. Filling a financial shortfall with a personal loan or credit card may be a less expensive option.
- Debt cycle possibility: Payday loans can trap you in a cycle of debt that is tough to escape. According to the Consumer Financial Protection Bureau, four out of every five payday loans are reborrowed within a month, putting you at risk of incurring even more costs. You may end yourself paying more in fees than you borrowed in the end.
- This isn’t a long-term fix: Create an emergency savings reserve if you can to use when unexpected bills arise. If borrowing small amounts of money on a regular basis becomes habitual, you may find yourself relying on debt rather than addressing underlying issues.
What other options do I have besides a same-day payday loan?
When you need money quickly, payday loans aren’t your only option. Comparing payday loans to alternatives will assist you in making the best decision for your situation.
Use a credit card you already have.
If you already have a credit card, you might want to use it while you’re in need of cash. Interest rates on your present credit cards may be far lower than those on payday loans.
Apply for a payday loan that isn’t a payday loan.
Some federal credit unions provide payday alternative loans with a $20 maximum application cost. Loan amounts range from $200 to $1,000, with durations ranging from one to six months.
To apply, you must have been a member of the credit union for at least one month.
Make an application for a small-dollar personal loan.
An unsecured personal loan is repaid over a predetermined length of time in monthly installments. The length of the loan varies per lender, but it usually ranges from 24 to 84 months, allowing you plenty of time to pay it off.
Consider taking out a cash advance.
A cash advance allows you to borrow money against the available balance on your credit card. Cash advances, on the other hand, usually come with higher processing fees and interest rates than regular credit card purchases.
If you don’t want to use a credit card, a number of applications are reinventing cash advances.
Earnin is an app that allows you to earn a payment advance for hours worked at a job before being paid. You can earn up to $100 every day with no fees or interest if you tip what you believe is reasonable. Earnin will automatically withdraw the money you owe when your paycheck is transferred into your bank account.
Branch is a similar software to Earnin in terms of functionality. You can request a 5 percent to 10% advance on your most recent paycheck. Your bank account is automatically debited for the amount you borrow. Unless you choose the fast deposit option, which costs $3.99 per instant delivery advance, this cash advance is likewise free of necessary fees.
What comes next?
The laws and regulations governing payday loans differ from state to state. Some states don’t allow same-day payday loans at all, while others have strict guidelines on how much payday lenders can lend and how much they can charge to let you borrow.
It’s a good idea to verify your state’s regulations and study internet reviews before taking out a payday loan. Also, keep in mind that you have alternative borrowing options to consider before taking out a payday loan.