Can I Apply PayPal Business Loan for My Established Business?
You’re eligible for the most part. The challenge will be proving your source of income is stable and can pay the loan. You’re in a similar financial status as you were before employment until you have proof of steady income, such as copies of your pay stub.
As such, the lenders available to you might perceive your situation as a risk to them and charge you an even higher interest rate than is the norm.
But you can still apply for one because you need the money. A few strategies can improve your chances, and we’ll talk about them shortly.
How to Boost Your Chances of Securing a Payday Loan Before Your First Paycheck
You must have thought about other options and found none before considering getting a payday loan. The following ideas might increase your chances of securing one.
Ask for a Lower Amount
The average payday loan is under $500. Since you don’t have proof of income, consider getting an amount lower than the average loan. You’ll also have it easier when repaying on payday.
Research shows that a payday loan may ask for $430 on average, which is about 36% of the gross pay of borrowers. Many of them can only afford to pay 5% of that to have money for other expenses.
Check Your Credit Score
Although some lenders don’t check your credit score because this cash advance attracts a high-interest rate, others may verify your payment history. For example, Michigan runs an electronic database that lenders must access before issuing these loans.
If a person has two current payday loans, they can’t get a third loan. If you’re already defaulting on several loans, convincing another lender you’re creditworthy might be an uphill task.
You have other options if it’s already clear no lender wants to assist you because of bad credit or can’t prove your income. For example, personal bad credit loans are more affordable than payday loans and suited to your poor credit rating. Additionally, you can get a personal loan co-signed by someone with good credit history.
Another alternative is peer-to-peer (P2P) loans that forego the traditional lending structure. Since investors back these loan requests, P2P loans are more appealing when funding people with a business idea or existing business. They already have good funding ratings.
But all is not lost yet. If you still want to try payday loan options, read on!
How to Get a Payday Loan
Many prefer payday loans because they’re fast and have minimal requirements. As such, you need a valid identification document to prove you’re over 18 years old, an active bank account or debit card, and proof of income.
There are, however, many differences between a payday loan and other secured or unsecured loans. One of the striking differences is the interest rate.
Payday loan lenders calculate the interest rate based on the money you expect in your next paycheck. Thus, it’s higher than other loans because that’s the collateral for this unsecured loan. Another reason for the high-interest rate is that many lenders don’t run a credit check, as is the case for other types of loans.
Each state had different statutes regulating payday terms and amounts. Some states specify the minimum and maximum loan terms, meaning you have to pay within that period. For example, in Kansas, a lender can ask you to pay between seven and 30 days from the transaction date.
Colorado has no maximum term, and the minimum is six months from the transaction date.
The duration matters because if your paycheck unexpectedly delays, you’ll default or ask for a rollover to extend the loan’s due date.
Since you don’t have your first paycheck, you’re at a disadvantage because the loan repayment options don’t favour you. One option is writing a postdated check for the lender to hold onto until your payday.
That way, if you default, the lender keeps the check. If you don’t show up and you have no money for the lender to cash the check, you attract a penalty for the overdraft and still pay the loan.
The second payment option is a lender deducting money from your bank account before you spend it on other bills. It’s an electronic process, and you have to give consent. Note that these payment options vary when you get a loan online and in a storefront.
Congratulations on your new job. Now, you need financial means to last you to your first paycheck. A payday loan can cater to expenses like groceries and rent.
However, it’s disadvantageous to ask for a payday loan without proof of the exact date you expect money from your employer or funds in your account for the lender. It’s worse when you have bad credit. Consequently, alternative loans for people with poor credit can get you through the month.