How Much Money Can You Get from Payday Loans Based on Income?
|Published: 18th September 2019 22:31|
Curious about the maximum you can receive from a payday loan? Learn the rates for payday loans based on income in this guide.
As the cost of living continues to go up and wages stay stagnant, people are turning to other resources to make ends meet.
That includes payday loans. It’s not just people down on their luck who turn to these loans for a quick shot of money. One recent study found that NHS nurses are the most common profession, making up almost 4% of all payday loans.
If you’re in a situation where you need a payday loan, how much can you take out?
Find out more about payday loans based on income that you can use in a financial emergency.
What are Payday Loans?
A payday loan is a small loan that you can take out for a short-term gap in your budget. Let’s say that you had a small repair that had to be paid, and now you're short on cash to pay for groceries and utility bills.
You can take out a payday loan for the amount of money you need now and pay it back when you get your next paycheck.
People turn to payday loans rather than asking friends and family for a little bit of cash. The loans are approved quickly and can get much-needed access to cash within a day or sometimes sooner. Go here to learn more about same-day payday loans.
Payday loans usually range between GBP 100 and GBP 1000, though the amount you can borrow depends on the lender.
Payday Loan Limits in the UK
In the United States, state legislators have passed laws regulating the payday loan industry. That’s due to the number of companies who have been accused of misleading customers in prolonging their loans by adding fees and rolling them over into new loans.
Some states have a limit on how much you can take out, regardless of your income. Others have a limit on the interest rate a payday lender can charge or a combination of both. There are states that have an income cap on the amount that you can borrow.
Some states won't allow you to borrow more than 25% of your monthly take-home pay. This is to ensure that you’re not borrowing more than you can pay back.
Meanwhile, in the UK, payday lenders were able to do whatever they wanted until 2015. At that time, the Financial Conduct Authority took over the regulation of payday lenders and created price cap rules.
These regulations didn’t limit the amount that you can take out, but they did place limits on the interest and fees you can assume if you don’t pay the loan back in full and on-time.
For example, a loan that costs GBP 500 can’t total more than GBP 1,000 because loans can’t total more than 100% of the original amount. Payday lenders also can’t charge more than .8% in interest per day, which lowers the amount of interest and fees a borrower would pay.
The trick here is that lenders can still rollover your loan into a new loan. So, let’s say you take out a GBP 500 loan. You don’t repay that loan on time, so you roll that over into a new loan for GBP 625. That original GBP 500 loan can now cost as much as GBP 1250.
Getting Payday Loans Based on Income
There are few requirements to get a payday loan based on income. One of the main requirements is that you have to show a pay stub to prove you have a regular income.
If you’re self-employed and you don’t have a steady income, you won’t be able to get a payday loan. That’s also true if you get paid in cash as opposed to a regular paycheck.
Payday lenders don’t have many checks, like most lenders. Most lenders will pull your credit score, ask for income verification, and process an application. That can take weeks before you see money in your bank account.
In uncertain situations, you don’t have weeks to wait for funds. You need to make sure you can cover your bills and pay for groceries.
The reason payday loans are popular is that you don’t have to go through those checks to get cash. Payday lenders verify your income and loan money to you. You get money fast when you need it the most.
Since they don’t have many checks to determine your creditworthiness, they are taking a big risk in lending money to you.
They rely on paystubs to determine how much you can borrow and payback. They’ll look at your income and know how much you get paid each pay period. They typically won’t allow you to borrow more than the amount of money you have in your paycheck.
The whole point of a payday loan is to be able to pay the loan back on your next payday. The longer it takes for you to pay the loan back, the more you’ll rack up in fees.
Make Sure Payday Loans Are Right For You
Can you take out payday loans based on income? You have to be in a position to show that you can pay back the loan on time. That means that you have to show pay stubs that have your regular income amount. Payday loans based on income usually won’t exceed the amount you get paid.
This allows you to pay the loan back in full, so you can avoid rolling over the loan and having to pay back more fees. It could keep you trapped in a cycle of debt if you’re not careful.
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