Frequently Asked Questions About Payday Loans

lady explaining payday loan terms to a man looking to take a loan

What is a payday loan?

Payday loans, or cash advances as they’re also called, are a type of short-term loan that can be used to cover an emergency expense. The borrower assigns the right to receive future pay cheque as collateral for the loan and then writes a post-dated check from their account on which they have sufficient funds to cover the amount borrowed plus interest and fees.

When the borrower’s next pay cheque comes in, it will automatically clear this check. If not enough money is there to make up the difference, another payday loan may need to be taken out or other financial assistance sought.

 

How is a payday loan different from a fast cash/personal loan?

A payday loan and a fast cash/personal loan are similar in that they both offer quick funds to help you get out of a financial jam. The difference is that with a payday loan, the borrower has to pay back the money lent at their next pay cheque or risk defaulting on their obligation (e.g., not having enough money in your bank account). With a personal or emergency loan, there’s no such requirement for repayment until after the recipient receives his or her next pay cheque.

 

What are the requirements needed when applying for a payday loan?

Payday loans are the most popular type of short-term lending. They can be used for a number of purposes, such as to cover emergency expenses and unexpected bills. When applying for a payday loan, borrowers will need to provide information about their bank account and income sources in order to get approved.

When you fill out an application for this type of loan, it’s important that you answer all questions honestly because some people try to take advantage of loopholes in the system by lying on their applications or presenting false identification paperwork. This is illegal and may result in jail time.

 

How much can I borrow with a payday loan?

A payday loan is a short-term, high-interest loan that can be an excellent option for those who are in need of money quickly. The most important part of understanding how much you can borrow with a payday loan is to know the APR, or Annual Percentage Rate.

This rate factors in all costs associated with borrowing money, including interest and fees. If you’re considering taking out one of these loans, it’s crucial to understand what your total cost will be before signing any paperwork!

 

What is a payday loan for?

A payday loan is a short-term, high-interest loan that you use to cover your expenses if you’re in a financial bind. They are typically used for emergencies and unexpected situations where the borrower may not have enough funds on hand to pay their bills or get by without any disruption in their daily life.

For example, imagine that you need $500 to fix your car before it breaks down completely but don’t have the money readily available because of an emergency expense last month. In this case, applying for a payday loan would be a smart idea so you can take care of the issue immediately and avoid being late on other monthly payments while waiting for your next paycheck.

 

What are the usual rates and terms of a payday loan?

Payday loans are a quick, easy way to get cash when you’re in an emergency situation. But before taking out a payday loan, there are some things you should know about the rates and terms of said loans.

The typical rate for borrowers is around 400% APR which means that if your original loan amount was $100, after one year, it would be worth $400 because of interest fees. If you pay back the loan on time with no late payments, this fee will not apply, but otherwise, these high-interest fees are applied each month until your outstanding balance is paid off.

 

How long does it take to approve my loan and receive the funds?

The answer to this question depends on a few factors. One factor being, the current state of your credit report, and another being how quickly you need the funds. The general rule is that it takes about 24 hours for approval and delivery of funds. If you have excellent credit, there’s a chance it could take as little as 12 hours or less!

 

How often can I apply for a payday loan?

Many people are unaware that they can apply for a payday loan more than once in a given year. However, you can only borrow up to $500 each time without having to provide collateral.

There is no limit on the number of loans you can take out within 12 months, but if your bank account balance falls below zero after taking out the second loan, you will be unable to get another one until it becomes positive again.

 

Are payday loans regulated?

Yes, payday loans are regulated in Singapore. The Monetary Authority of Singapore (MAS) regulates the maximum interest rate that can be charged on all forms of short-term credit facilities, including payday loans. As such, they will not exceed an annual percentage rate of 36%.

This limit is to ensure that borrowers who need access to funds urgently can do so at a reasonable cost and with appropriate safeguards against the risk of over-indebtedness or other related consequences.

 

Is my credit score checked or impacted when applying for a payday loan?

A lot of people may not know this, but your credit score can be impacted when applying for a payday loan. If you have an outstanding balance on the account that is being used as collateral for the loan, then it will show on your credit report and affect your credit score.

However, if you have a good standing history with the bank or company where you are getting this loan from, they might allow you to take out a secured personal instalment agreement instead of a payday advance that would include an interest rate.

This type of financing could potentially help increase one’s credit ratings by paying off their loans in full every month while still having access to funds close to payday, so they don’t get caught up in costly fees and penalties associated with late payments.