With the ease of the Internet it is easy to get confused by all of the websites advertising for payday loans. There are also a lot of fraudulent companies that are preying on those in need. Taking a few minutes to better understand the process can help you make the best decision about borrowing money through a payday lender.

  1. Meet the requirements. The requirements for a payday loan vary a little from lender to lender, but most of the requirements are very similar.
    • Steady, documented income. In order to get a payday loan you must be receiving a regular income that you can prove. The income can be from a job, a monthly disability check, insurance payment and so on. It must come in regular intervals. The proof must be in the form of pay stubs, an annual letter describing the benefits and amount, regular direct deposits and so forth.
    • Checking or savings account. Having a banking relationship allows the company to direct deposit the loan into your account. It also allows them to create a draft for the payment on the loan. Most companies require the account be open around a month.
    • Phone number where the lender can contact you outside of work. Companies want an evening phone number. Most want an email address as well. Remember that if you do not pay the loan off at the next pay day, the lender will call you. Some companies are more aggressive than others, but ignoring the calls will make matters worse, not better.
    • Must be 18 years or older. This will be a requirement for every lender. Customers under the age of 18 cannot legally enter a contract. Expect to prove this with a driver’s license or other official ID. Some companies require you to prove you are here legally, but many do not.
    • Minimum income requirement. Most companies have a minimum threshold of income. This is generally very low, like around $1000 a month. You do not have to prove much income to qualify so don’t let this stop you from applying.
    • Not currently in bankruptcy. This is stating the obvious. If you are in bankruptcy then you will just add this debt to the bankruptcy and the payday lender will not get paid.
    • Proof of residency. This will vary from lender to lender depending on where the lender is licensed to issue the loan. Some lenders require you to be a resident of the state, where you are applying. A driver’s license establishes residency. Online lenders will have more flexibility with this requirement.
  2. Decide where you want to get the loan. Once you have determined that you meet the requirements of a payday loan you are ready to apply. There are two major avenues for payday lenders, storefront lenders and online lenders. For storefront lenders, you will select where you want to go, walk in, put in an application, and they will guide you from there.Online lending is more convenient, in the sense that you can apply online. There are however concerns over legality, fraud and regulations. Some important questions to ask the lender when looking at online companies would be the following:
    • What states are you regulated by? Do you follow the CFSA (Consumer Financial Services Association) guidelines? This information is often found on their website. Strong companies put this information where it is easy for you to find.
    • Check with the BBB (Better Business Bureau). While many payday lenders might have lower ratings because consumers don’t like the high interest rates. That is a reality of the type of loan you are getting. Look instead for customer service issues. Do they follow the legal guidelines for debt collecting? Do they work with borrowers that get behind? Those are the questions that will help you narrow the field.
    • Get references. Do you know of friends or family members that have worked with a particular company? What experiences have they had?
  3. After you have selected the company you want to work with, put in the application. The applications online are generally short and easy to fill out. They will call you or email you back with a decision. This process is very fast. Be prepared with income verification and your driver’s license, and that will speed the process up even more.

Once you take out the payday loan, do your best to pay the loan off quickly. The average consumer pays the loan off over 8 pay periods. Extending the loan out this far will be very costly. The faster the loan is paid off, the less you will pay in fees and interest.