Avoid Applying For a Payday Loan

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Whenever possible, avoid applying for a payday loan if you are unable to make the payment. These loans require pre-authorized electronic withdrawals from your bank account. If your bank account cannot accommodate the withdrawals, the lender will charge you insufficient funds fees. Instead, try to ask your creditors for an extension of time to repay the loan. This way, you can avoid paying high interest rates. Also, you can consider applying for a small-dollar loan from a credit union or a non-profit financial cooperative that offers low-interest small-dollar loans to their members.

Interest rates are 391%-600%

Payday loans are a high-risk form of finance. Interest rates for these loans are typically 391%-600%, and can be very difficult to pay back. The interest rates can add up quickly, especially since 80 percent of borrowers fail to repay their loans within two weeks. The longer a loan goes unpaid, the higher the interest rate will be.

The federal government has been trying to improve consumer protection by enacting new regulations on pay check lenders. The Consumer Financial Protection Bureau introduced new rules last year, requiring payday lenders to determine a debtor’s affordability before granting a loan. However, the Trump administration has criticized the new underwriting laws and has threatened to revoke them in 2020.

Minimum membership requirements

Before you apply for a payday loan, it’s important to check the minimum membership requirements. You’ll need to provide proof of reoccurring income to be approved. You should also be a member of the credit union for at least 12 months. Moreover, you’ll have to commit to one Quick Cash Loan per 180-day period.

Savings deposits

Payday loans are a type of short-term loan that is due on the borrower’s next paycheck. To get approved for this type of loan, lenders assess the borrower’s credit rating, payment history, and income. Generally, even borrowers with bad credit or low income can get approved.

Having a savings account is an excellent way to qualify for a payday loan. There is no minimum balance or extra fees for these loans, but you must make sure that the balance does not go negative. Many payday lenders allow you to apply online, eliminating the need to talk to a bank representative.

Interest rates

The interest rates on payday loans are so high that some states have banned these loans or capped their rates. The average APR for a payday loan is 391%, which is more than 20 times higher than the average interest rate on a credit card. Fortunately, there are new laws in effect that are aimed at protecting consumers from paying too much for these loans.

The Consumer Financial Protection Bureau reports that the industry can charge up to 2.5 times as much as the loan itself in fees and interest. This leads to an unfortunate cycle of “rollovers,” wherein consumers keep borrowing until they are unable to pay.


If you have poor credit or are unable to pay your bills on time, there are many alternative cash sources. Federal credit unions and community banks offer small loans for longer terms than payday loans. Prepaid debit cards are also available, and are generally cheaper than payday loans. Another option is to borrow money from an emergency fund. Typically, these loans do not charge interest, and you can access them within hours. Finally, consider setting up a savings account. These funds can help you pay for essential expenses, like a broken down car or an emergency medical bill.

While payday loans can be a lifesaver in times of need, they can quickly escalate your financial situation. Depending on your situation, payday loans can cost as much as 400% of your income. While the federal government has a rate cap of 36%, payday loan fees can go higher than that. Many people are forced into a cycle of debt they can’t avoid.

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