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Payday Loans and Alternatives

Your Guide to Payday Loans and Other Loan Options

No matter how prepared you are, there might come a time when you struggle to pay the bills. This can happen to anyone, but it’s more likely to occur if you don't have enough savings to cover unplanned expenses like medical bills or sudden unemployment.

That’s why so many people turn to short-term loans like payday loans from direct lenders or alternative sources for fast cash. Payday loans, in particular, can be helpful in a pinch since they come with minimal loan requirements and quick funding times. With a payday loan, you can cover small, unexpected expenses immediately rather than having to wait and risk falling behind on other bills.

But while payday loans might seem like an easy solution to a financial emergency, they might not be the right one. Before applying for one, it’s important to understand how they work, their various fees and risks, and how to handle them. Depending on your circumstances, you might find that another fast loan — like personal installment loans — is a better option.

Need fast cash now? Apply for an installment loan online through Jora.

What Are Payday Loans?

Payday loans are an extremely common borrowing option often used as an alternative to installment and other direct lender loans. To illustrate this, over 12 million individuals take out at least one payday loan yearly.

Like many other personal loans, payday loans are unsecured loans. In other words, you don’t need to put up collateral in exchange for funds. Payday lenders also typically have very few loan requirements, making qualifying for these types of loans easy. You might not even need a credit check when applying for a payday loan. Because of this, they’re sometimes referred to as bad credit loans or no credit check loans.

There is a trade-off, however.

Payday loans typically come with a short repayment period of two to four weeks. Most lenders require you to pay back the loan — plus interest and financing fees — in a lump sum payment. For many borrowers, the short repayment term combined with potentially high fees makes it hard to pay back the loan on time.

This is very different from how installment loans work. With an installment loan, you can usually expect a much longer repayment period of a few months or years. You also don't need to pay off the entire loan at once. Instead, you can make fixed payments over a set period until the balance reaches zero. A longer repayment period makes it easier to manage the loan.

How Do Payday Loans Work?

The way payday loans work is simple. You can typically apply for one through a brick-and-mortar location — similar to getting a title loan or furniture financing. But you may also be able to apply for payday loans online.

When applying for a payday loan, you typically need to provide proof of income and have an active bank account. You may also need to provide information about your current employer and the next anticipated pay date.

Very few lenders require a credit check, meaning you could still qualify for funds if you have poor or limited credit history. This makes these loans attractive for borrowers who have trouble qualifying for traditional credit.

If a payday loan lender does check your credit, it results in a hard credit inquiry, which could cause your credit score to drop by a few points. With good payment habits, however, you can increase your score over time.

Once you submit your application for a payday loan, whether online or in person, the lender will proceed to review your information and make a decision. This process is usually quick. If approved, you may even receive funds the same day you apply. This is similar to how installment loans from direct lenders like Jora Credit work*.

Remember that payday loans usually come in small amounts compared to installment loans. The typical payday loan is around $500, though each state sets minimum and maximum loan amounts. Therefore, these loans for low credit are good for small, short-term expenses but not larger ones.

Once approved for a payday loan, you typically receive the funds directly to your bank account. To pay back the loan, you either need to write a postdated check that covers the entire loan amount plus fees or set up a direct debit through your bank account. Unless you repay the loan early, the lender cashes the check or withdraws money from your account when it’s due.

Are Payday Loans Legal In My State?

Payday loans are currently legal in the following 36 states:

Federal and state laws regulate payday loans. Moreover, loan amounts, repayment terms, finance charges, and the number of loans you can take out simultaneously vary based on where you live.

The Consumer Financial Protection Bureau (CFPB) also strives to protect consumers from predatory payday lending practices in the United States. The main purpose of this is to keep people from falling into the payday loan debt trap.

Payday loan laws often change, so it’s important to stay informed. Check with your state’s attorney general’s office to see if a lender is allowed to operate in your area. Or head to the National Conference of State Legislatures to see the current payday lending rules.

And remember, payday loans are not your only option when you’re scrambling for some extra cash. Even if payday loans are prohibited where you live, other financing solutions exist, such as online installment loans, unsecured loans, and other emergency loans online.

Where to Get Payday Loans

You can find payday loans online or at storefront locations. If you’re having trouble finding a lender, perform a quick online search to see which ones are located near you.

Keep in mind that payday loans have many names. These include cash advances, emergency cash loans, and bad credit loans. Be on the lookout for short-term loans for people with low credit or no-credit-check loans, as these might also be payday loans.

Factors to Consider With Payday Loans

Not all payday loans are created equal. If you’re considering getting one, here are the main factors you should consider first.

Interest Rate and Financing Fees

Payday loans don't have a typical interest rate but still have fees. A lender typically sets these fees — sometimes called financing fees or financing charges — based on how much you borrow and where you live.

Some lenders also charge late fees or other fees. Read the fine print of any loan before signing for anything.

Current Debt Load

Payday loan lenders rarely consider your current debt when agreeing to give you a loan. If you’re not careful, you could end up with a loan you cannot repay. And if you miss a payment, you could end up with late fees or an overdrawn account.

Consider your current debt and whether you can reliably repay a payday loan before taking one out. If you regularly struggle to pay your bills, chances are you'll have a harder time paying back the payday loan when it comes due.

And if you still need the cash, consider taking out an installment loan from Jora. These loans also come with fast funding times, but they have longer repayment terms, making them easier to manage. Plus, they have no hidden fees.

Loan Amount

Most payday loans range from a few hundred dollars to $1,000, depending on where you live. Check what your state’s loan limits are before applying. Also, only borrow what you need and be sure to account for any other fees so that you don't end up with more debt than you can handle.

Repayment Term

Repayment terms tend to be very short when it comes to payday loans, though each state sets its own rules. See what your state regulations are before applying.

Benefits of Payday Loans

Payday loans come with several benefits, especially if you’re looking for unsecured loans for bad credit or need emergency cash. Here are some reasons why one of these loans might be right for you.

Easy Loan Requirements

Payday loans typically have minimal loan requirements, especially compared to traditional financing options like auto or mortgage loans. These loans for bad credit are also for borrowers who need emergency cash now but cannot get a loan elsewhere.

To be eligible for a payday loan, most lenders require you to be at least 18 years old (21 in some states). You also need proof of income, an active bank account in your name, and a valid government-issued photo ID. Only rarely do you need to worry about getting a credit check done.

Lax lending requirements make payday loans convenient and accessible for borrowers who need loans for bad credit. However, payday loans are not your only option if you need funds and have bad credit. Certain online installment loan lenders, like Jora, consider your overall financial situation when deciding whether to lend you money — not just your credit score.

Simple Application Process

Whether you choose a storefront or an online lender, the loan application is generally quick, easy, and free. As with many online installment loans, the entire process usually takes about five to 10 minutes to complete.

Fast Approval and Funding

Many payday loan lenders can approve your loan application quickly — usually within a few hours or by the following day. You might even receive the funds in your bank account the same day you apply.*

Some online installment loan lenders, like Jora, also offer same-day or next-day approval and funding times, making them a good, fast loan option.*

Unsecured Loans

Certain personal loans, such as auto loans or mortgages, are considered secured because they require you to put up collateral to get the funds. Failure to pay back what you owe could result in losing the collateral that was used to secure the loan.

Like other unsecured installment loans, payday loans don't require collateral. Even though you’re still responsible for paying back what you owe, you won't lose your assets if you default on your payments.

Why Jora Credit?

We are a state-licensed, direct lender providing online loans that give you access to the funds you need.
It’s easy to apply right from your phone, laptop or tablet – anywhere, anytime. And it only takes a couple minutes.
Plus, there's no prepayment fees if you want to pay off early and save some money on interest.
Accept your loan by 10:30 am Central time (Monday - Friday excluding holidays) and you can get your funds on the same day.*

Drawbacks of Payday Loans

As with any type of financing, payday loans also have several key drawbacks worth knowing about before applying. Depending on your financial situation and current needs, you might find another option — like an installment loan from Jora — that's better for you.

Expensive with Hidden Fees

One of the biggest disadvantages of payday loans is that they’re expensive, especially compared to other alternative financing solutions. Even if you’ve calculated the total loan cost, including financing charges, you could still struggle to pay back what you owe.

If you’re unable to pay back your loan on time, your lender might let you roll over your original payday loan into a new one. This might seem like a good idea as it gives you more time to repay your debt. However, the new loan comes with its own set of fees, which can be expensive to manage. You also still have a short repayment period to deal with.

Predatory Lending Practices

The payday lending industry is full of scams and unreputable lenders. Some lenders may not be licensed to work in your state at all, while others might charge higher fees than they’re allowed. Always confirm that any lender can legally operate in your state before working with one.

Overdrawn Bank Account

One common way to pay back payday loans is by authorizing an automatic electronic payment through your bank account. But if the funds are unavailable, you could be hit with expensive overdraft fees.

Repaying the loan early or ensuring the funds are in your account are two ways to prevent these charges. You might also be able to cancel or stop an automatic payment if you act quickly enough. You still need to repay the loan, however.

Do Not Build Credit

Can you get a loan with bad credit? Yes. But do payday loans build credit? No.

Getting a payday loan doesn't help you build credit unless you choose a lender who happens to report your positive payment activity to credit reporting agencies such as Experian, Equifax and TransUnion. However, few payday lenders do this, so you usually cannot use a payday loan to improve your credit score even if you pay it off on time.

Unfortunately, payday loans can hurt your credit. Most payday lenders report missed or late payments to the credit reporting agencies. If you don't repay your loan, your lender might even send it to collections, damaging your score even more.

If you need bad credit loans quickly, you might want to consider getting an installment loan instead. Many direct installment loan lenders report both positive and negative payment activity to the credit bureaus, which can help you build credit over time (as long as you make on-time payments).

How to Apply for a Payday Loan

If you’re wondering how to get a bad credit loan, you’re in the right place. Although loan requirements vary by lender, here is what you typically need to apply:

  • Verifiable income (e.g., W2s, paystubs, current letter of employment, recent bank statements, recent tax returns)
  • Valid government ID showing you’re at least 18 years old (e.g., driver’s license, state license, passport)
  • Social Security card
  • Current physical and mailing address
  • Phone number and email address
  • Bank account information (account must be in your name)
  • Proof of direct deposit from your current employer (in some cases)

These requirements are not unique to payday loans. You typically need to provide the same information and documents when applying for most online installment loans.

Who Should Get a Payday Loan?

You might want to get a payday loan if you:

  • Need emergency cash fast
  • Want a loan with a fast credit or no credit check
  • Have a limited credit history or poor credit
  • Are looking for unsecured loans that don't require collateral
  • Need loans for low credit (or loans for bad credit)
  • Don't qualify for traditional financing options

Payday loans are generally useful when dealing with emergencies or small expenses like utilities, student loan payments, gas, or car repairs. Just make sure you can pay back what you borrow plus any lender fees, or you could end up with more debt than you can handle.

A Closer Look at Bad Credit Loans

Payday loans are not the only type of bad credit loan out there. For example, there are also title and pawn shop loans, though these are both secured loans.

Regardless of which type of bad credit loan you choose, they all have several things in common: no credit check (except in rare cases), quick application and funding times, and lax loan requirements.

Certain lenders, like Jora, also offer installment loans for bad credit borrowers. These loans come with no hidden fees, and larger loan amounts for more expensive emergencies. As with payday loans, you can apply online.

Frequently asked questions
We bring honesty and transparency to financial services technology

Jora offers two types of loans, depending on your state of residence – installment loans and lines of credit. To see which type of loan is offered in your state, please view the What it Costs page and select your state.

Jora Credit is the Lender. Jora Credit operates under state specific companies, licenses, and rules for the states that it services. Jora Credit does not lend or arrange loans or lines of credit in all states. Please see What it Costs for the serviced states and applicable terms.

Alternatives to Payday Loans

If you need emergency cash, payday loans are not your only option. Other types of financing exist, such as bad credit installment loans and emergency 401(k) loans. Before choosing one, here’s what you should know.

Friend and Family Loan

Asking a friend or family member for a cash loan is a great way to save money on interest or other fees. You also rarely need to undergo a credit check or complete a formal loan application. However, you should still be upfront about how much money you need, why you need it, and when (and how) you expect to pay it back.

Pawn Shop Loan

Like payday loans, pawn shop loans don't require a credit check. You must put up a valuable item — like jewelry or an electronic — in exchange for funds, though. In most cases, you have around 30 days to repay the loan plus any fees, or you could lose your valuables. If you don't want to risk this, consider a pawn shop alternative.

Emergency 401(k) Loan

If you have a 401(k) through your employer, you might be able to take out a 401(k) loan. You have to pay back what you borrow, but any interest goes directly back into your account. Keep in mind that not all employer-sponsored retirement plans allow this, though.

Title Loan

Title loans are secured loans for bad credit borrowers. The loan amount you can get is based on what is offered in your state, your need, value of your vehicle appraisal — and have 30-day repayment terms.

You need to put up your vehicle as collateral to get one. Failure to pay back the loan on time could mean losing your vehicle.

Cash Advance

A cash advance is another type of short-term loan that doesn't require a credit check. These typically come in small amounts. You can get one through your bank, credit union, or a cash advance app. These options are often free, though some charge a fee.

Keep in mind that you’re borrowing money against your upcoming paycheck. This means your next paycheck will be smaller than usual, so be prepared for that.

Installment Loan

And last but not least are installment loans.

An installment loan is a type of personal loan that usually doesn't require collateral (though some are secured). Depending on your creditworthiness and income, you might qualify for a higher loan amount than what you’d get with payday loans. You can also benefit from longer repayment terms.

When getting an installment loan through an online lender like Jora, you don’t have to worry about hidden fees. You could still qualify for a direct lender loan if you have bad or limited credit history.

Get Quick Cash Now

Jora offers installment loans to borrowers with bad credit. If you apply and accept a loan offer by 10:30 a.m. Central time (Monday through Friday), you may receive funds that same day.*

Once the money is in your account, you can use it for nearly anything you need — whether that’s car repairs, medical bills, or other emergencies. These loans come in amounts of up to $4,000, depending on where you live.