Do you live paycheck to paycheck like millions of other Americans do? Do you live in California and need a source of cash to make a payment or pay for an emergency expense? Do you have a low credit score and struggle to get quality loans?
If these ring true for you, you might be looking for a payday loan in California. However, Covid-19 can make this difficult to get a cash loan in person. Fortunately, California payday loans online allow Californians to get the emergency cash they need right from the comfort of their home. Let’s take a deeper dive into online payday loans in California.
What is a Payday Loan?
In the world of personal finances, there are many forms of debt that allow borrowers to get money that they otherwise would not be able to get. For example, credit cards and loans allow borrowers to spend money on important purchases without having to pay back the balance right away.
One such form of debt is called a payday loan. Compared to other types of loans, payday loans are much smaller and are repaid much quicker. Payday loans are typically no more than $500 and can be as small as $25 in some cases. Borrowers typically have to turn around and pay back the loan amount plus interest in a week or two or on their next payday, hence the term “payday loan.” While there are various aspects of payday loans that are different from lender to lender like the APR and repayment, they overall tend to be smaller and quicker than other loans.
Compared to other loans, payday loans are widely available to people with poor credit scores. Small loan amounts mean lenders can live with some borrowers defaulting. While this is a good thing for borrowers, this also means that these loans can also be very expensive in terms of their interest rates. In fact, some payday loans have APRs that are in the thousands of percent. These high interest rates paired with a quick repayment period can make these loans very difficult to pay off. For this reason, a huge amount of people fail to pay back these loans which pushes them into worse financial hardships with greater credit difficulties than they were in to begin with.
What are Online Payday Loans?
Online payday loans are pretty simple. Instead of going to a brick-and-mortar storefront to get a payday loan like you would have to in the past, you can now get payday loans right from your phone or computer. As you can probably see, this is much more convenient for customers and is much quicker as well. With seemingly everything switching over to digital, it’s no surprise loans can be done digitally as well.
Online payday loans means that lenders can operate in different states and still offer you a California payday loan. This opens up a huge variety of lenders for you to make your decision on. Instead of having to drive miles and miles in California traffic to visit physical stores you can now compare lenders right from your couch. Pretty nice right?
Online Payday Loans in California
While payday lending might seem perfect for your needs, it’s important to know the facts about these loans. While they can certainly be helpful, payday loans are a part of an industry that is known for its predatory practices. Many payday loan lenders in the past have been caught trying to keep their borrowers in a cycle of debt called a “payday loan trap.” Lenders try to keep their borrowers in debt so they take out more loans from them to pay back their current loans. As you might be able to see, this is very hard for borrowers to escape once they are stuck in the cycle. This payday loan debt can financially ruin someone and hurt their credit score beyond repair.
For reasons like this, both brick-and-mortar and online payday loan lenders have been heavily regulated across the country and have even been outright banned in some states like New York. However, they have essentially no regulation in states like Texas. California falls somewhere between the two.
California allows payday loans (they call them “a deferred deposit transaction”) but regulates them somewhat heavily. Despite regulation, roughly 12.5 million payday loans were taken out in California just a few years ago. Each lender that offers these payday loans must have certain certification and license that allows them to give out loans in California. To protect borrowers further, California mandates the loan provider and borrower agree to a contract where the borrower must provide their ID and other information while the lender must clearly specify the details of the loan, like loan amount and interest rate.
Let’s take a closer look at some of the important aspects of payday loans in California and how California’s laws affect them.
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One aspect about California payday loans that makes it unique is the loan amount. In California, payday loans cannot exceed $300. Even if a borrower wants to take out more, they legally cannot be lent more than $300 if they are loaning from a payday loan provider.
Does this seem unfair? What if you need more than $300 to make an emergency payment? While capping the short term loan amount might seem like an annoying regulation, it is arguably put in place to protect borrowers. Because of huge interest rates, larger payday loans mean huge interest payments. Naturally, lenders want to lend as much as they can to borrowers so they can collect this interest. This is not necessarily in the best interest of borrowers and California took it upon themselves to cap loan amounts as a result.
APR and Fees
States like Texas do not have regulations for how expensive payday loans can be for borrowers. As you can see, this can cause issues for borrowers. Borrowers in difficult situations are oftentimes at the mercy of lenders and lenders take advantage of this by charging high APR and fees. California seeks to fix this by regulating the APR that lenders can charge borrowers as well as limiting the number of fees.
In terms of APR, California caps the APR for payday loans at 460%. It is illegal for lenders to charge anything higher than this on their loans. Even if a direct lender agrees to let a borrower pay later than their original date, they are not allowed to charge any more than 460% APR. While this is still expensive, it’s important to understand that small loan amounts and short repayment periods cause APR to be in the hundreds. Thankfully, regulations from California prevent lenders from charging APR in the high hundreds or even thousands of percent.
For fees, California mandates that fees cannot exceed $17.64 for each $100 borrowed. Further, any finance charge cannot exceed more than 15% of the loan amount, up to $45.
Repayment Terms
Many states regulate that payday loans cannot be shorter than 7 days in length, meaning borrowers have at least a week to pay back the cash they borrowed plus interest. California oddly enough does not specify a minimum loan term for payday loans. However, California does cap the maximum payday loan term at 31 days.
Rollovers
Sometimes borrowers cannot pay back their loan and must “roll” their loan into a second loan. Because payday loans are so hard to pay back, this is a very frequent occurrence for borrowers. While they are frequent, they are often very bad for borrowers and can push borrowers further into the debt cycle.
California does not allow rollovers for payday loans. For better or for worse, borrowers cannot roll one loan amount into a separate loan if they cannot make a payment.
Miscellaneous
Some other information to note about payday loans in California is that a borrower can only have one outstanding payday loan at a time.
Also, after paying off their payday loan borrowers must wait one day for a “cooling-off” period before they can take out another payday loan.
Before You Get an Online Payday Loan in California…
While you now know the rules and regulations around online payday loans in California, there might be some things that are still unclear. Because of untrustworthy lenders, it’s important to know as much as you can about these loans before you get one. Failing to do your research could cause you to get a bad loan that can hurt you and your credit score!
Keep reading for some good know-how about online payday loans in California.
What to Expect
California has the largest population in the entire country which makes it the biggest market for payday lenders. Both brick-and-mortar lenders and online lenders alike want you to get their loans! This means that there are likely plenty of lenders to choose from when you are looking for a loan, even if you have a bad credit score. While you won’t need to drive to every lender to compare them, expect to still have to do your research and narrow your choices down to a few good lenders you are comfortable with getting cash from.
When filling out a loan application, expect to have to input a lot of information online including your personal information as well as information about your bank account. Giving out sensitive information is another reason to find a direct lender that you trust. You will likely have to sign some forms and agreements as well. Carefully read each one of the online payday loan forms. Once approved, expect to get your money within 24 hours.
Know if You Qualify
For every online payday loan, you will need to be over the age of 18 and you will need to have some form of identification. This is the same for every lender you go to. However, some requirements vary from lender to lender. For example, some lenders may require a minimum credit score while others don’t check your credit score. Some lenders will want to see a steady source of income while others might not care.
Be Aware of the Risks
Even if you have found the perfect online payday loan lender for your cash needs, you should still be aware of the risks that come with payday loans. Compared to most other loans, payday loans can be more difficult to pay off because of their high APRs and short repayment periods. Especially if you are thin on cash, it can be hard to pay back an entire loan plus interest in a week or two.
Be aware that if you cannot pay back your loan, you might have to take on more debt which can be expensive and can dig you an even deeper hole. Don’t take out debt if you can avoid it. If you can’t, make sure you do your research and find the best lender for your cash needs.
Know that while payday loans may seem like your only option, there are alternatives to payday loans that are safer and more trustworthy. Let’s take a look at the best online payday loan alternative in California, Possible Finance.
Best Online Payday Loan Alternative in California: Possible Finance
Here at Possible Finance, we have created a product that is an alternative to the oftentimes dangerous payday loans. We offer loans of small personal loans that can be paid back with a series of four payments over a course of a month instead of one week like most payday loans. Not only are our loans cheaper due to our lower APRs, but they are easier to pay off. If you are struggling to make a payment, you can extend your payment up to 29 days right within our app, free of charge.
Most payday loan lenders don’t report your successful payments to the credit bureaus. This means that even if you do manage to pay off your payday loans your score won’t increase and you will be stuck getting payday loans. Possible’s loans are credit builder loans, which means your credit gets built as you pay back our loans. Even more, we don’t check your credit score when you apply for our loan. No matter your credit score, you can get our loan and begin building your credit with each payment.
Interested in getting a loan with Possible? Download our app today and get started!
