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      What are the primary requirements in order to be eligible for a payday Loan? From The Investopedia Team Investopedia logo Updated August 31 2021 Review by Charlene Rhinehart Payday loans are also referred to as cash advances are short-term, low balance, high-interest loans usually at high rates. The name is derived from it being common for funds to be borrowed using an undated check or account withdrawal authorization effective on the payday that the borrower is due to receive. These loans are designed to be fast and typically easy to qualify for , provided the applicant has a job. They’re designed to aid people get cash fast that will last until their next paycheck which is why they are referred to as a “payday loan.” Payday loans are also called cash advance loans, deferred deposit loans as well as post-dated checks loans and check advance loans. Most important Takeaways The fundamental requirements for getting an payday loan are a source of income, a check account, and a valid identification. Borrowers must be at least 18 years old The application for a payday loan can be approved within minutes, but the loans have extremely high rates of interest that trap numerous people in a vicious cycle of debt that is growing. Recent CFPB rulemaking has removed a crucial element of the initial 2017 payday lending rule , but left another in place. 1:37 Click Play and learn more About Payday Loans Basic Requirements to Apply for Payday Loans According to the federal Consumer Financial Protection Bureau (CFPB) that to be eligible to receive a loan, most payday lenders only require the borrowers Be at least 18 years old; Be able to open a checking account • Make sure you have proof of your income , as well as a valid identification. The loan can be approved within 15 minutes. In the majority of instances the borrower will write checks for the loan amount, plus a loan fee and the lender keeps the cash until a set due date. The majority of payday loans are extended for just one or two weeks. When the loan is due then the borrower can either pay off the loan or authorizes the lender to pay the post-dated check, or, if necessary, withdraw from the account of the borrower. Recent CFPB Rulemaking The CFPB issued an interim rule on July 7 in 2020. It removes the requirements of a 2017 Obama administration rule mandating payday lenders determine the capacity of a borrower to pay back the loan and retains an Obama condition that limits the frequency of attempts for payday lenders the bank account.1 2 Leading up to the July 7 regulation, the Trump administration issued regulations in February of 2019 to revoke the obligatory underwriting section of the rule and to delay September 19, 2019 effective date of the rule.3 A follow-up announcement was issued on June 6, 2019 final rule postponing the August 2019 compliance date.4 The dangers of payday loans Many people get into financial problems with these types of loans when they’re unable make payments before they’re due. Every time the creditor extends the loan in the future, additional fees are added to the loan. Payday lenders charge a cost of between $10 and $30 for each $100 borrowed, as per to CFPB. A 15-cent fee is equivalent to about 400% annually. Payday loans are accessible to people with poor credit and do not require a credit score. About 12 million Americans take advantage of payday loans each year, and the majority do not have access a credit card or savings account, according to the Pew Charitable Trust. Payday loans can be risky, leading the borrower to a worse financial conditions down the road. They are prohibited in a number of states. Interest Rates for Payday Loans Needs for loan repayments should not be the only factor to consider when looking to take out getting a payday loan. When it comes to annual percentage rates, it is not uncommon to see payday loans to exceed 500 percent or even 1,000%. Even though policies and models of business restrict the size and duration of payday loans, these types of loans are still a costly alternative and should be considered cautiously. Because of their high rates of interest, payday loans are the most costly method of borrowing money. States have laws that regulate how much payday lenders can provide and the amount they are allowed to charge for loans, while other states, such as New York, ban the loan process completely. In those states in which the practice is prohibited, lenders can often circumvent restrictions by working with banks in other states. Amounts of Payday Loans The qualifying loan amounts differ based on your income as well as the payday lending company, however most states have laws establishing the maximum payday loan amounts. Certain states have even restricted the capacity of borrowers to hold several current payday loans in an attempt to prevent consumers from taking out massive amounts at steep interest. The loan amounts vary from $50 to $1,000, depending on the law of your state. Sponsored Reliable, Simple, Innovative CFD Trading Platform Are you looking for a trustworthy CFD trading software? 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