If you make less than $40,000 a year, don’t have a college degree, don’t own your own home and are divorced or separated, you’re a prime candidate for a payday loan.

When you apply for a payday loan, the lender won’t give you the whole story. It’s important that you fully understand the risks before you borrow.

Payday loan pros and cons at a glance

Pros of payday loans

They’re quick and easy

These loans are quick, easy, flexible, convenient, invaluable for emergencies, use the money for anything, and usually do not require a credit check. All you need is an ID and bank account. 

There’s no credit check

Payday loan lenders won’t check your credit reports with the three major credit bureaus, so you’ll still qualify even if you have bad credit or your credit score is less than perfect. All you need is an ID and proof of income. Payday lenders don’t report your loan to the major credit bureaus (Experian, Equifax, TransUnion) if you pay back the loan on time and in full.

They’re easy to access

When you’re in a bind and need quick financial relief, it is easy to stop by any of the 23,000 payday lenders in the U.S.; that’s twice the number of McDonald’s restaurants. Most offer a same-day funding option until 2 p.m. CST, or next business day funds delivery.

It’s an unsecured loan

Payday loans are considered a form of unsecured debt, unlike a mortgage, which means you do not have to give the lender any collateral or put anything up in return, like if you went to a pawn shop.

There are fewer requirements than in traditional financial services

Borrowing from payday lenders is not as rigorous as lending from traditional sources like a bank or credit union. There are little to underwriting requirements for this fast approval.

Green Light Cash Low-Interest rates

Your Faster Payday Quick Release of Funds

Loans Angel Best for Poor Credit

Our lenders can help customers obtain as much as $5,000 depending on the lender, state and financial situation.

Payday loan lenders target low-income, minority communities

According to a report from the Center for Responsible Lending, there are about 8.1 payday loan stores per 100,000 people in Black and Latino communities. Mostly white neighborhoods had about 4 for every 100,000 people.

Cons of payday loans

You’ll have to provide access to your bank account

Payday lenders want this access to your account so they can verify your income, set up payments, and deposit funds. By writing a check on your account, you authorize the payday lender to remove cash directly from the account. Authorizing a payday lender alone should be enough to make anyone uncomfortable.

Online lenders ask for a routing and account number, while brick and mortar lenders ask for a voided check containing your routing and account number. It’s possible to stop these ACH payments from being debited from your account, but it requires some specific actions.

Payday loans will not help you build credit

Because they do not report to the big three credit bureaus, which most financial institutions rely upon to deem your creditworthiness, payday loans will not help you build or contribute to your credit history. If you are unsure if they do — ask.

How payday loans work

Payday loans should only be used when you need quick emergency cash and only as a last resort. You visit a brick-and-mortar payday lending storefront or online payday loan lender and fill out a loan application. You’ll get the funds almost immediately. You will be expected to provide checking account information, and the lender will usually debit the money from your account on the next payday.

The bottom line

Payday loans are an easy, enticing avenue to pursue when in a financial pinch. But these types of loans should be a last resort.

Payday loan is a financial instrument that allows consumers to access cash quickly during times of great financial need. Since these loans are available to consumers regardless of their credit scores, they will not have to deal with the hassle of a credit check in order to get funds. The process is incredibly fast and far less frustrating than attempting to obtain credit from traditional lenders.

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