It is unlikely you will be able to use a payday loan to buy a house, as the amount of money you can borrow with these loans is significantly less than the cost of a house in the USA.
You may in theory, borrow money online in the form of a payday loan, with the intention of utilizing some or all of the money borrowed to put towards a new house. However, it is unlikely that you will be able to borrow enough money to actually buy a house through payday loans, cash advance loans and other similar online loan products.
Who Are Payday Loans For?
A payday loan is a loan which is designed to last you until your next payday from your employer or place of work. This means that it is for emergency expenses and that you should pay it off when you receive your monthly income in the next few weeks.
These loans, much like to other short term loans should never be used for longer term expenses and financial obligations, as their interest rates are higher and they are not designed to be used in this way. Even if you borrow $2500 online or another larger loan amount, you should only use it for absolute necessities and financial emergencies, not larger purchases, including a house or property.
Payday loans are deemed high risk as many individuals who apply for them fail to pay them back alongside the additional fees which the lender will charge for borrowing the money on payday. These loans are usually used for people than need smaller loan amounts for a fairly short period of time, for example, you may need a 500 dollar loan over a month, and in such cases, a payday loan may be the answer.
What Do You Need To Apply For A Payday Loan in the US?
In order to apply for a payday loan in the US, it will depend on which state you are in, with laws, rules and regulations around payday lending vastly different between states. For example, getting a payday loan in Kentucky will require potentially different eligibility criteria to be applied compared to say a payday loan in Nevada or another state.
Generally, when it comes to payday loans in the US, you have to be over the age of 18, have a registered bank account and proof that you receive income on a monthly basis.
This is to ensure that you are an adult, that a lender can transfer the money into an account which you can access and that you have some means of repaying the money borrowed at the end of the month.
If you do not have a form of regular income, whether it is from full or part time employment, you will not be approved for a payday loan as you do not have a means of repaying the money to the lender.
This is why the loan is referred to as a ‘payday’ loan, as it is only supposed to last you up until payday.
What Are Payday Loans Used For?
Payday loans are designed to be used for financial emergencies and unexpected bills and expenses, when you do not have enough money to last you until the end of the month when you receive your monthly income.
This means that payday loans should be used to cover emergency medical bills, funeral costs, or home and car repairs. They are not supposed to be used for frivolous or unnecessary spending, including a house or property purchase.
Why Can’t You Use A Payday Loan To Buy A House?
It is unlikely you will be able to use a payday loan to buy a house for various reasons.
Firstly, you cannot borrow more money than you will receive at the end of the month. This is to ensure that you have the opportunity to repay the money borrowed when you receive your monthly income, and that you will not then fall into a cycle of missing repayment dates.
Consequently, unless the property you are looking to purchase costs less than you earn in a month, you will not be able to borrow money to purchase it.
Secondly, payday lenders do not typically offer big loans. This is because they are designed for individuals who are struggling financially and therefore only need enough money to last until the end of the month. People tend to borrow $600 loans and other smaller loan amounts when it comes to these loans.
Consequently, lenders are unlikely to offer you enough money to successfully purchase a property.
Thirdly, payday loans are only designed to be used in emergency situations. Buying a property is not an emergency situation, and whilst lenders will probably not ask you what you plan to use the loan for, buying a property is not a typical reason for which you should apply for a payday loan.
Lastly, most individuals who are looking to buy a property will have to take out a mortgage. A payday loan and a mortgage are very different things, and lenders looking to offer you a mortgage will do a much deeper inspection of your financial situation than a payday lender would.
Taking out a mortgage is a big responsibility and it will usually take many years to pay off, whilst a payday loan is designed to be repaid at the end of the month.
If you are looking to take out a payday loan, you should consider whether you really need to apply, whether it is the right option for you, and whether you will definitely be able to pay it back to avoid having to pay additional charges for late or missed payments.