Payday loans, also known as cash advances, are short-term, low-balance, high-interest loans typically at usury rates. They are so-named because of a tendency for the funds to be borrowed on a post-dated check or account-withdrawal authorization effective on the borrower’s upcoming payday.
These loans are designed to be quick and generally easy to qualify for if the applicant has a job. They are intended to help consumers get some quick cash to hold them over until their next paycheck, hence the name “payday loan.” Payday loans are also called cash advance loans, deferred deposit loans, post-dated check loans, or check advance loans.
Key Takeaways
- The basic requirements for a payday loan are a source of income, a checking account, and valid identification. Borrowers must be at least 18 years old
- The application for a payday loan can be approved within minutes, but the loans come with extremely high interest rates that catch many people in a spiral of rising debt.
- Recent CFPB rulemaking removed one key provision of the original 2017 payday lending rule and left in place another.
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Basic Requirements for Payday Loans
According to the government’s Consumer Financial Protection Bureau (CFPB), to qualify for a loan, most payday lenders only require that borrowers:
- Be at least 18 years old;
- Have an active checking account; and
- Provide some proof of income as well as valid identification.
The loan can be approved in as few as 15 minutes. In most circumstances, the borrower writes a check for the loan amount plus a lending fee, and the lender holds onto the check until a predetermined due date. Continue reading “What Are the Basic Requirements to Qualify for a Payday Loan?”