Applying for a Payday Loan: A Step-by-Step Guide

When you have short-term financial trouble, a payday loan can help bridge the gap and provide much-needed funding to keep you from falling short on bills or other needs. The important thing to remember with a payday loan is that the interest cost, if measured in terms of annual percentage rate, is exorbitant at 300% - 1000%, so they should only be used for emergencies. Being short on cash and wanting to go to a movie does not provide financial justification for taking a payday loan; being late on credit card payments and ruining your credit rating does. Applying for a payday loan is a relatively simple process that can be done online.

Step One: Choose a Lender

Your choice of lender is probably the single-most important decision you will make about this type of loan, particularly if you are applying online. Trust your instincts, verify the legitimacy of the company, and do not provide any personal information if you have reason to believe the lender is not completely reliable. Because you will be providing the kind of information that can be used to steal your identity, it is important that you choose a lender you can trust. Verify the company's rating with the Better Business Bureau or your local consumer affairs office. Do not respond to offers that come through your email; instead, find a lender on your own. Remember, you will be providing this lender with access to your bank account, so you need to know you can trust the institution you choose.

Step Two: Complete the Application

Most payday lenders offer online applications and processing, and most do not require you to provide verification of your income. If you apply in person, you may be able to complete the application and receive funding the same day; if you complete an online application, it may be 24 hours before your money can be credited to your bank account. Be sure to complete the application thoroughly. When you submit an application online, your agreement to the terms and click of the submit button constitutes a signature and obligates you to whatever the terms of the agreement are, so make sure you read the terms carefully and understand what you will owe and when.

Step Three: Receive Funding

In most cases, your payday loan can be deposited directly into your checking account overnight. Because the cost of this type of emergency loan is so high, do not ask for more than you need to get by. Be sure you understand how much you have to pay back and by what date they will withdraw the payment from your account. If for some reason you will be unable to meet the obligation you agreed to for repaying the loan, contact the lender as early as possible. Typically, the lender will allow you to extend the repayment by agreeing to pay additional fees.

Step Four: Protect Yourself

Carefully monitor your checking account to make sure that no more than what you authorized is removed from your account for repayment. If you become suspicious, talk to your banker about protecting your account or cancelling the authorization once payment has been made.

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