Payday loans are a small, short-term advance designed to be paid back in full with considerable interest at the time of the borrower’s next paycheck.
For the individuals who use them, payday loans are both a last resort and a safety net. These individuals tend to have checkered credit histories that may prevent them from borrowing money at lower rates of return. The mortgage is late, the rent is due, the electricity will be turned off if a payment isn’t made – they’re grateful to have access to payday funds.
But what happens if someone isn’t not qualified for a payday loan, or the lender turns that person down for some other reason?
Payday Loan Qualifications – Most lenders have conditions that must be met before a payday loan will be approved:
• Regular Income: A borrower must have a regular source of income, whether from a job, an annuity or some sort of pension (including Social Security.)
• Minimum Income Requirements: Most lenders will require borrowers to have a minimum baseline income between $800 and $1200 per month. They will verify that income by requesting paycheck stubs or copies of bank statements.
• Direct Deposit: Many lenders require prospective borrowers to have their paychecks directly deposited into their checking accounts. Without direct deposit, the amount applicants can borrow is lower and the interest rates are higher.
• Checking Account: A payday loan applicant must have a checking account.
• Minimum Age Requirement: Payday loan borrowers must be at least 18 years of age.
• Military Exclusion: By the terms of the 2007 FY Military Authorization Act, it is illegal to issue a payday loan to military personnel.
If you’ve been turned down for a payday loan because you don’t meet one or more of the qualifications, you will have to turn to another funding option. Obviously there is little you can do about your age or military status if these were the things that disqualified you. But you can open up a checking account, you can and most employers will allow you to sign up for direct deposit so that the next time you find yourself in this situation, you will be eligible for a payday loan.
Alternatives To Payday Loans –
If you’ve been turned down for a payday loan, there are some other options you can try:
• Overdraft protection. Most banks offer overdraft protection, essentially a small line of credit that covers the amount if an individual writes a check for more than what’s available in his or her account. There is generally a limit to how much the bank will cover, and there may be penalties if your bank determines you are abusing your overdraft protection. There are also processing fees involved which generally come to anywhere from $25 to $50 – considerably cheaper than the interest rates you’ll pay with a payday loan. If you were seeking the payday loan in order to pay off a pressing bill, making use of your overdraft protection may be a viable – one time – alternative.
• Credit card advance. If you have a credit card that allows it, you can take out a cash advance. This may cost you more than a payday loan: Cash advance fees often come to four percent of the total advance, and interest is not only higher than it is for regular purchases, it also begins accruing the instant the cash is in your hand. Nevertheless, it’s an option that should be considered in a true emergency. Alternatively if you were seeking the payday loan to pay a bill, see if your creditor will accept a credit card payment.
• Ask your employer for the loan. Make an appointment with your boss or your human resources manager and see if the company you work for can make you a loan. True, this is potentially embarrassing: Nobody really wants to involve his or her workplace in a personal emergency. On the other hand, we’ve all been where you’ve been and if this is a one time situation, chances are your employer will be less judgmental than you think. Your company may also give you the option of paying off the loan over a longer period of time than a payday lender might.