A payday loan is a short-term financial solution that can help you cover your immediate cash needs until you receive your next paycheck. These small, high-cost loans usually come with triple-digit annual percentage rates (APR) and payments are typically due within two weeks or close to your next payday. If you're struggling to make ends meet, you can start by calling your creditors or the loan servicer to see if you can get an extension on your bills. When it comes to payday loans, if your check bounces or you can't pay the full balance on the required payday, you may have to transfer the loan to the next payday, resulting in more fees.
The lower your credit score, the higher your interest rate and personal loan charges will be, or you may not be approved at all. To avoid getting into a debt cycle, it's important to work on fixing the underlying financial issues that led you to a payday loan counter. Banks like Simple Loan and Bank of America's Balance Sheet Assistant offer short-term funding for existing customers. Although a payday loan may seem like a quick fix, there are other options that can help you stay out of debt. People with poor credit or no income may not be able to get a personal loan with better terms.
Check NerdWallet's database of local alternatives to payday loans to see what's available in your state. If you don't have a plan to pay off your payday loan in full by the requested date, you'll need to refinance your loan, meaning you'll be responsible for the principal balance, additional charges, and accrued interest. Before applying for a payday loan, it's important to talk to banks and credit unions about your lending options and find the best available rate. Online lenders also serve borrowers with bad credit and can finance loans the next business day, but rates may be higher. Avant requires a minimum credit score of 580 FICO with an estimated APR ranging from 9.95 percent to 35.99 percent - significantly lower than the estimated 400 percent you would face with a payday loan.
If you don't show up for repayment, the lender will write the check or make the withdrawal for the loan amount plus interest. It's important to remember that payday loans are short-term cash loans based on the borrower's personal check held for a future deposit or electronic access to their bank account. The payday lender may report the default to the credit bureaus or sell the debt to a collection agency that does so, which will hurt your score.
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