Online payday loans can be used for a variety of purposes and are designed to cover expenses that may arise before your next paycheck. Payday loans can allow a borrower to get different loan amounts quickly, ranging from $100 to $35,000. For larger amounts however, it is less likely you will be suitable to apply for a payday loan, as these loans need to be repaid once you receive your paycheck from your employer.
In recent times, it has become more popular than ever to borrow money online instantly, in the form of short term loans, which has opened up these loans to more people than ever.
Payday loans and other forms of short term loans should only be used in times of financial emergencies, when there are no other options, but payday loans can help borrowers get back on their feet, by paying off their debts or sorting out financial emergencies.
How Do Payday Loans in the US Work?
An online payday loan is a type of short-term loan which gives borrowers quick access to funds before their next payday. They are designed to be fast loans that can get you the money you need as fast as you need, to help you get on top of financial emergencies and unexpected bills and costs.
They are short-term, high-interest, unsecured loans and their loan term is typically between 2-4 weeks. Generally, when it comes to online payday loans for example, the borrower needs to repay the full amount in one lump sum repayment upon receiving their paycheck from their employer. They are generally used for small amounts of cash (typically from $300-$500).
Online, it is possible to apply for a payday loan from the comfort and safety of your home, rather than having to go from payday lender to payday lender and you can therefore compare many different online payday lenders quickly and efficiently.
What Is The Purpose of an Online Payday Loan?
Online payday loans are meant to be used to cover emergency expenses that may arise between paydays that you may not have budgeted for, such as unexpected medical bills, a burst pipe or car repairs.
These loans are not intended or meant to cover luxury purchases like a holiday or other non-essential purchases. You should also, always seek alternatives to payday loans, like borrowing from friends and family before you commit to a payday loan in the first place.
The idea of these online loans is that you can borrow enough money to cover the expense (usually a small amount) and repay that amount back when you get your next paycheck. It is not recommended that payday loans are used to cover ongoing expenses such as groceries or utility bills, if you are having long-term financial problems.
This is because it is an expensive form of borrowing and you may risk entering a nasty cycle of debt.
What Can Payday Loans Be Used For?
Although payday loans are designed to cover emergency expenses in the short-term, there is nothing which stipulates that you cannot spend your payday loans on whatever you choose, once you receive your funds. You should always think about whether or not you need a payday loan before you apply to borrow any money online, to avoid any unnecessary debt.
In general, you should use them for short-term emergency expenses that may occur like housing and car repairs or an unexpected medical emergency. It should be noted that the misuse of payday loans can be dangerous for borrowers and cause them to get into a worse cycle of debt.
Common uses for payday loans in the USA include:
- Car and vehicle repairs
- Home repairs
- Rent and mortgage arrears
- Consolidating numerous debts into one, single monthly debt
- Unexpected and large medical bills
You should only apply to borrow money online that you absolutely need. Therefore, if for example, you are eligible to borrow $600 but you only need $400, you should not apply for more money just because you can. By only applying for the money you absolutely need, you are more likely to be able to afford to repay and manage the payday loans you do get accepted for.
Payday loans are known to be an expensive form of borrowing, you should only take out exactly the amount you need to avoid paying additional interest.
How Much Can You Borrow Online With a Payday Loan?
The average amount of a payday loan in the USA is $375 but the exact amount will depend on how much the borrower wants to borrow and what the lender is willing to lend. Due to the high interest rates associated with payday loans, even borrowing a small amount of money can work out to be very expensive.
For example, for a loan of $375, borrowers will spend around $520 on interest alone. The APR on payday loans can in cases be as high as 600% and therefore, being responsible and not borrowing money you don’t need is a good practise to undertake (read more about things to think about before submitting a payday loans application.)
Is It Easy To Take Out An Online Payday Loan?
Payday loans are known to be one of the most accessible forms of loans online in the USA; not only are they widely available online from lots of lenders, they also do not require hard credit checks like many other forms of loans or credit.
This means that lenders will not always leave a record on your credit record of their searches. This in turn means that by applying for a payday loan online, you will not necessarily damage or even impact your credit score.
They also have very basic requirements such as proof of a source of income, ID verifying that the borrower is over 18 years old and a valid checking account. Because payday loans are used to provide quick access to funds, it means they can be approved very quickly and funds can be received on the same day.