Generally, payday loan companies do not review credit history before approving borrowers, as the Community Financial Services Association of America states. At its own discretion, a company may use a risk assessment report to find out whether an applicant already has an active payment status with another cash advance lender. Most lenders only require proof of income, a checking account and valid identification for approval, and they do not typically report these loans to credit bureaus.Continue Reading
A payday loan is a small, short-term advance that is usually due on the borrower’s next pay date, as the Consumer Financial Protection Bureau explains. The borrower gives the lender a payment check or checking account information in advance so that the lender can collect the balance on the predetermined due date. Depending on the lender, the borrower has to repay the debt in a lump sum or installments, but some companies accept interest-only payments to extend the repayment period. Payday loans are illegal or heavily regulated in some states.
Payday loans are potentially expensive because lenders charge high fees, which are usually based on preset increments or percentages of the loans' balances, according to the Federal Trade Commission. The loan company adds more fees to the balance if the borrower requests an extension. The FTC recommends applying for loans from small lending companies or credit unions instead of applying for payday loans.Learn more about Personal Loans