What Is A Cash ‘Til Payday Loan?

by Jim Hughes   November 29, 2018

A payday loan is a financial product that offers funding ahead of a consumer's upcoming paycheck under the condition that the consumer pays back the loan as soon as they are paid.

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Sometimes, you might want to cover an emergency bill but lack the cash to sort it out. Whenever you are in such a situation, you need to look for an alternative to traditional loans that could provide you with the funding you need to sort out your emergency. One option that you could consider is cash ‘til payday loan, which is provided by certain lenders to help you with your emergencies. The lenders provide you with funding to get you through to your next payday. This option is for people who find it hard to wait until they get paid in order to fulfill their financial obligations.

Using a cash advance loan till payday could help you to avoid the penalties that are associated with overdrawn bank accounts and unpaid bills. The name of this loan hails from the fact that you have to pay back the loan amount plus the interest when your next payday comes. If you have no money to spare, you might want to read on to learn how these loans work.

How does a payday loan work?

Each of the cash advance loans till payday that are available in the market today operates in just about the same manner. They don't involve a complex process. You only need to follow a number of steps. Thanks to modern technologies you can now fill out your loan application in under 5 minutes. Additionally, you can receive the loan amount in your bank account in as little as one business day.

During your application, you need to give out your basic information, which includes your identification, bank details, residential and email addresses, a valid phone number, and your source of regular income. Keep in mind that you have to be 18 years old and above to receive a payday loan.

It's crucial for you to look for a lending institution that is responsive. The lending institution should answer any questions you may have and explain its services to you. The lender must inform you of the terms of the loan such as the interest rates and the upfront loan fees. Through the various fees associated with payday loans, the lending institutions are able to make money and stay afloat so that they can help more people who need finances urgently.

Cash ‘til payday loan terms differ from one lender to the other. One common thing with the lending institutions is that you have to repay the loan amount when your next payday arrives. Payday loans lenders offer borrowers loan amounts ranging from $100 up to $1,000. There are lenders who take postdated checks to act as security for the loan amount given.

The upfront fees that the lenders charge you result in high-interest rates for the loans. In fact, the interest rates can be as high as 400 percent per annum (although, calculating an annual percentage rate for a loan due in a couple of weeks is not an accurate way to demonstrate the fees). If you are unable to pay the full loan amount on the due date, you should ask the lender what options are available to you. You should know that extending the repayment period may result in a higher interest rate. That is why it's advisable to borrow an amount that you can manage. Some states, however, regulate the interest rates that borrowers are charged to make the loans more reasonable

Does your credit score matter when you want a payday loan?

Getting a loan from traditional lenders such as banks is a long and tedious process. The bank has to assess your credit score to confirm your eligibility for the loan. If you have poor credit, you may not qualify for such a loan. However, this is something that you shouldn't expect from a payday loan lender. The process is quite easy, and the lenders are less likely to disqualify you for bad credit.

Intriguingly, the online request takes only a couple of minutes. If you are eventually approved by the lender, they will set up a repayment plan. How it usually works is on your pay date the lending institution will automatically deduct the amount owed, the interest, and the loan fees.

Benefits of a Payday Loan

Facing a cash emergency before you receive your salary can be stressful. However, one can use a payday loan to relieve the financial burden. Here are some of the benefits of taking up a cash ‘til payday loan.

I. Fast Loan Approval and Application

One of the key advantages of opting for a payday loan is that the application process is fast and simplified. The lenders might also approve your loan application almost instantly after you've filled out the loan application form. What's more, you may not need to fill out a lot of forms like with traditional loans. Most lenders require you to fill out an online application. After they have verified your details, they transfer the full loan amount to your bank account in about 24 hours. The fast application and approval process makes cash ‘til payday loans the ideal option for someone who needs emergency funding.

Anybody with emergency cash needs might find it hard to rely on a traditional lender. This is because conventional lending institutions take weeks if not months to process your loan application and not everyone qualifies for a loan. On the other hand, a payday loan lender provides you with quick feedback even if you don't qualify for the loan.

II. Minimal Requirements

Interestingly, payday loans don't tend to have as many requirements as the traditional loans. These lenders only need your basic details, your bank details, and your proof of income among other requirements. If you have a stable and regular income, your chances of qualifying for a loan are quite high. As long as you are at least 18 years of age and your income sources are verifiable, there is a good chance you can get a payday loan. Additionally, payday lenders don't need collateral to provide you with funding.

III. Convenience

If you have ever tried to get financing from a bank, you're aware of the processes involved. You sometimes have to book an appointment with a loan officer and hold several meetings with him or her before your loan is approved. Additionally, you may have to make numerous calls to your loan officer to discuss the terms of the loan. However, this is not the case with payday loans.

They are quite convenient. A borrower fills out an online application and sends it. There are a few other steps, but it is a much easier process than what you see with other types of funding. You can use your payday loan to sort out a wide variety of emergencies. You can use the money to pay your home bills, hospital bills, or even repair your vehicle.

IV. Loan Amount

Another interesting thing about payday loans is that they come in different sizes. However, most lenders limit the loan amount that new borrowers can get. The first loan amount may be based on the borrower's income level and the range that a lender has set for new borrowers. For example, if you receive a small amount on your first application and manage to pay the loan on time, the lender can increase your loan limit over time.

However, the amount that borrowers receive is partly determined by state regulations.

V. Credit Rating

Payday lenders may not scrutinize your credit score as much as traditional lenders do. However, defaulting on a traditional loan could lower your credit score and result into fines that will affect your credit rating.

Jim Hughes   OpenCashAdvance Marketing Manager
Personal Finance
Jim Hughes remembers checking his first email on the original BlackBerry 850 nearly 20 years ago. It was spam, and he fell for it. Even so, he’s been on the beat every day since, following the ebbs and flows of financial technology. Look to Jim for insider exclusives on shorter-duration loans, installment loans, and other popular products in fintech today.