Are you thinking about getting an online payday loan in Texas? If so, there are some things you should know before you get one of these loans. Let’s take a deeper dive into what online payday loans are and what you need to know about getting them from licensed lenders in Texas.
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 to the direct lender.
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.”
Compared to other loans, payday loans are widely available to people with poor credit scores. While this is a good thing, this also means that these loans can also be very expensive in terms of interest rate. 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.
In the past, borrowers could only get payday loans from brick and mortar locations. Customers would have to go into these offices and manually apply for a fast cash loan. After some time, customers would get the cash or money deposited into their bank account. While this process was faster than getting a larger loan, the process was still somewhat slow.
Thankfully, technology has improved the payday loan process. Today, you can get payday loans right from your phone and computer. When getting an online payday loan, you apply for the loan on the company’s website or app. Many of these application processes are automated, which means your loan can be instantly approved or denied in some cases. If the process is instant, it might take a few hours or a day at the most.
Once your loan application is approved from the online payday loan lender your money is directly deposited into your bank account. From then, you can use the cash. When the loan and the interest is due, you pay back the loan electronically as well.
Compared to payday loans from brick and mortar locations, online payday loans are much faster and much more efficient, not to mention they are much more convenient. If you are in a pinch financially and are in serious need of some quick cash, the concept of payday lending can get your money to you quickly wherever you are.
Unfortunately, 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 would 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. For this reason, payday loan lenders have been heavily regulated across the country and have even been outright banned in some states like New York.
Did you know that of all the states in the United States, Texas holds roughly 23% of every payday loan that exists! This makes Texas the single biggest payday loan market in the entire country. Unlike states like New York, many Texans frequently use payday loans to have access to quick cash they otherwise wouldn’t have. In 2019 alone, there were 1.4 million payday loan clients and nearly 2.3 million new payday loans. These are staggering numbers that no other state rivals.
Despite having the most payday loans in the entire country, payday loans have still been regulated in Texas. This means that payday loan lenders must follow certain rules and guidelines. These regulations are almost always to protect the borrower. However, this ends up affecting the loans and can make them look different from loans in another state.
As we mentioned earlier, payday loan amounts are typically no more than $500. While some states cap payday loan amounts, Texas approaches this differently. Texas as a state does not have any regulation specifying loan amounts for payday advance loans. However, many cities in Texas have instead created their own regulation for loan amounts. Payday loan amounts in some Texas cities cannot exceed more than 20% of the borrower's monthly income before taxes. For example, if you make $3,000 a month you cannot get a payday loan that is more than $600. Beyond this rule, there is no law regulating how large Texas payday loans can be.
The APR on payday loans is oftentimes the aspect of payday loans that is regulated the most. Due to quick repayment terms and lenders charging a high interest rate, APRs for payday loans can reach the thousands which makes payday loans relatively expensive compared to other loans. To protect customers, some state governments limit the APR that can be charged on payday loans.
Texas is no such state. Texas has no regulation on what the APR for loans can be. The APR can legally be in the thousands if lenders so desire them to be. While this allows for more lending options for borrowers, this certainly can make payday loans more expensive in Texas than other states. While other states try to protect borrowers by enforcing lower APRs, Texas does not do this which is unfortunate.
Repayment terms for payday loans typically depend on the direct lender. However, Texas has some rules that govern repayment terms. The repayment period for loans cannot be shorter than 7 days. While this usually is not an issue with payday loans, the maximum payday loan repayment is 180 days.
As we mentioned earlier, payday loan borrowers oftentimes struggle with paying back their loans. This forces them to oftentimes take out more debt to pay off the earlier debt. This is commonly referred to as “rolling over” one loan into another loan. Overall, this is very expensive and pushes borrowers further into debt. Unfortunately, Texas does not have any legislation that protects payday loan lenders from unfair repayment terms.
As we mentioned, Texas has more payday loans each year than any other state. Texas alone has nearly a quarter of every payday loan each year. However, this isn’t necessarily a good thing. Payday loans are a part of an industry that has been busted many times because of predatory practices that hurt borrowers more than it helps them. While not every payday loan lender is necessarily like this, there are enough to make it a problem. Texas has so many people that get so many payday loans that there are likely hundreds of thousands of people being harmed by Texas payday loans.
Unfortunately, the state of Texas has essentially taken no steps to protect its citizens from the harmful practices of payday loans. There are no limits for how large the loans can be and how expensive their APR can get. For people that have no other choice but to get cash from payday loans, this can make paying back the loans extremely difficult. While some cities within Texas have taken steps to protect borrowers, there is arguably not enough state-wide protection from payday loan lenders in Texas.
Before you jump right into getting an online payday loan in Texas, it is important that you understand everything that comes with getting one of these cash advance loans. In the payday loan world, not every lender is your friend and you have to be careful where you get your fast cash from. Getting your cash from a bad payday lender can make your short term loan extremely expensive and difficult to pay back. For this reason, let’s look at some of the things you need to think about before you get an online payday loan in Texas.
Again, Texas has more payday loans than any other state in America. 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. Expect to have to do your research and narrow your choices down to a few good lenders you are comfortable with getting cash from.
In terms of applying for your loan, you can expect to have to input a lot of information online including your personal information as well as information about your bank account. Again, giving out sensitive information is another reason to find a payday lender that you trust. You will likely have to sign some forms and agreements as well. While you may just click “agree” on every other online form, you should carefully read the online payday loan forms. Once approved, expect to get your money within 24 hours.
If you have ever gone to a DMV you know it can be frustrating to be turned away because you are missing one requirement or one document. To avoid this, make sure you qualify for an online payday loan before you apply.
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.
As we’ve said many times already, payday loan lenders can be predatory and this is extremely relevant in the state of Texas. Do your research to find the lender that fits your needs right. Look at things like the APR on the loan, the loan amounts, and the repayment terms. Loans aren’t a one-size-fits-all and there will be loans that are good for you and some that are not. Do your homework to make sure you don’t get stuck with a harmful loan that does not meet your cash needs.
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.
Also 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. 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 Texas, 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 $500 or smaller 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 cheaper because of 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!