What are Instant Payday Loans Online?

Chang Fu
March 17, 2020

First off, a payday loan is a short-term, high-interest loan, usually $500 or less and often repaid on the borrower’s next payday. However, payday loan structures and fees vary quite a bit by state and by lender - you can find a full overview on payday loans here.

An instant payday loan online is a payday lending option that can be applied for and disbursed online very quickly through your mobile phone. With technology today, you can apply for a payday loan, title loan, or any other loan through your computer or phone and receive your loan directly in your checking account or on your debit card. With an online payday loan, you don’t need to walk into a physical store and you have the flexibility to apply and receive money in the comfort of your home or while on the go.

A Possible loan is the best alternative to a traditional instant online payday loan . With lower annual percentage rate of interest (APR), more flexibility, and the ability to build credit history, borrowers are much better off taking a loan from Possible Finance than a traditional payday loan alternative. Plus, applying only takes a few minutes and you can receive money almost instantly on your debit card or in 1-2 business days in your checking account.

Process to get an instant online payday loan

There are numerous banks, financial institutions, and lenders that offer online payday loans. A quick Google search will come up with a variety of ads and options. Make sure you’re working with a direct lender (not a reseller of data) and you can double-check your lender at the NMLS Consumer Access website.

Online payday lenders have similar requirements and will usually need at least:

  1. A government-issued ID like a driver’s license
  2. An online bank checking account to deposit and withdraw funds from
  3. Your address to verify where you reside due to state lending laws
  4. Your social security number to verify your identity and prevent fraud

Some online payday lenders want:

  1. Permission to check your credit history even if it doesn’t hurt your credit score
  2. A debit card to disburse your loan if you’re looking to receive money immediately
  3. A mobile phone if you are applying for the loan on a mobile app
  4. A pay stub photo or other verifiable income

An online application for payday loan can usually take 5-10 minutes. Be sure to read everything carefully and understand the loan terms. Here are a few key terms to know:

Interest Rate. The interest rate of a payday loan should be quoted in an annual percentage rate (APR). According to Debt.org, the interest rate for payday loans are usually 300-500% APR. Depending on your state and depending on your lender, the interest rate will vary. Definitely look to borrow money from lenders with a lower interest rate.

Due Date(s). Most payday loan companies usually expect payment in full on your next payday and usually within 2 weeks. The date in which the loan must be repaid is the due date. Some alternatives to payday loans such as Possible Finance have repayments split into multiple installments. In those cases, there are multiple due dates and each installment has a different due date. With Possible, due dates can be flexibly changed within the app depending on your needs.

Fee. The interest fee on a payday loan is the most common type of fee. It’s often quoted as some dollar amount for every $100 borrowed. For example, the fee can be $15 for every $100 borrowed, meaning that when you repay the loan, you will need to repay $115 when borrowing $100. There can be other fees associated with a payday loan, including debit card fees, origination fees, etc. Be sure to take into account the full costs of getting your loan from each lender before choosing your lender.

Maximum loan amount. This is the highest loan amount the lender can approve you for. You can choose to borrow an amount up to this maximum loan amount. The maximum loan amount can be affected by state laws. For example, the maximum loan amount in Washington is $700.

Credit checks for instant payday loans online

The online payday lender you choose might run a credit check but it depends on the lender. There are multiple types of credit checks:

Soft inquiry. Some payday lenders will use a soft inquiry with one of the credit bureaus to check your credit history. It may not be with a large credit bureau like Experian, TransUnion or Equifax. Instead, it could be a smaller credit bureau or subprime credit bureau. In either case, the lender will look at your credit history profile to help their underwriting process.

Hard inquiry. It’s unlikely a payday lender will use a hard inquiry. Hard inquiries are more common when applying for a credit card, a personal loan, or a mortgage. Hard inquiries, especially a lot of them in a short span of time, can hurt your credit score.

Be sure to read the fine print and understand what credit check you may or may not be agreeing to when you’re applying for an online payday loan. Just because a lender says “no credit check is required” doesn’t mean they won’t run a credit check on you if you agree to.

Borrow up to $500 in minutes even with bad credit.

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Benefits and risks of an instant online payday loan

Benefits

  1. When no bank or credit union will approve you, many payday lenders may still approve you. Because they tend to not use the same underwriting factors such as debt to income ratio or a minimum credit score, you may have a better chance of borrowing money from a payday lender than traditional financing at a bank or credit union
  2. Funds can usually be received within 1-3 business days. If you have a debit card, you may be able to receive money directly on your debit card within an hour which is almost instant!
  3. The application process can be under 5 minutes and applying will be faster than visiting a payday lending storefront or applying for another type of loan such as an auto loan, mortgage, personal loan, etc.

Risks

  1. Annual percentage rate of interest (APRs) for payday loans are significantly higher than many other types of borrowing. In fact, the average APR is usually above 400% which is much higher than personal loans which are under 36%.
  2. It can be confusing who to trust online to borrow money from. It’s important to do the proper research on the lender you decide to use. You can check the NMLS Consumer Access website as well as read the reviews and online articles about each lender.
  3. If you can’t repay the loan on time, you may be stuck in a vicious debt cycle of borrowing more money, rolling over your debt, and paying more and more interest over time. Don’t borrow from payday lenders if you aren’t planning on paying back the debt.

Examples of instant online payday lenders and a “Possible” alternative

  • CashNetUSA is a big online payday lender that operates in certain states arouthe country. It’s part of a publicly traded company called Enova Financial and was founded in 2004. In addition to payday loans, CashNetUSA offers installment loans and lines of credit as well. You can learn more about CashNetUSA in the review by Finder.
  • LendUp offers payday loans, installment loans, and other forms of short-term credit to borrowers. The company started in 2012 and received financing from Paypal, Google Ventures, and others. Unfortunately, in September 2016, LendUp was fined by the Consumer Financial Protection Bureau (CFPB) and a California state regular over widespread violations of payday and installment-lending laws. LendUp agreed to pay $6.3 million in penalties and customer repayments. The CFPB found that LendUp didn’t give consumers the opportunity to build credit or access to cheaper loans in certain states as it had claimed it would.
  • Oportun offers personal loans in the states it operates in including California, Texas, and others. It used to be called Progreso Financiero and specifically targets underserved Hispanic communities who have historically had little or no credit history. It’s loans range from $300 to about $6,000. Oportun was founded in 2005 and is headquartered in San Carlos, CA. 
  • Opploans is an installment loan lender that is an alternative to traditional payday loans. They’re headquartered in Chicago, Illinois and primarily serve underserved customers who have little or no credit history. Although they are an installment loan, the APRs end up in a similar range as many payday loan options and places like LendUp according to a review by eCheck.
  • Possible Finance has a mobile-only installment loan that has an APR of 150-200%, lower than most traditional payday lenders. You can apply and get approved even with bad credit or no credit. Repay the loan over multiple installments and build credit history. Possible reports to all three credit bureaus: Experian, TransUnion, and Equifax. You can reschedule payments anytime within the mobile app.

Alternatives to traditional instant online payday loans

Did we mention Possible? Oh right, yes we did. You can download the Possible app here on the iTunes or Google Play store.

Here are some other options depending on your financial situation:

Online title loans. These loans can be dangerous but if you know you can pay back the loan, it can sometimes be cheaper than a traditional payday loan. Just remember, if you can’t pay back the loan, the lender can seize your car which is used for collateral. Title loans are still high interest and short-term so if you can qualify for better financial products, stay away!

Payday advance apps. There’s a few apps out there that will advance you cash early before your payday. Payday advance apps can come in handy, especially when you’re tight on cash. But remember, you are basically borrowing against yourself - you’ll need to pay the money back on your payday so you’ll have an underwhelming paycheck day! In addition, payday advance apps may include membership fees, subscription fees, tips, and other fees you’re not thinking about. Plus, they don’t have to tell you an APR because they’re not considered a loan under most state regulations!

Personal loans and credit cards. If you have the credit score for it (usually 650 or higher), personal loans and credit cards are a much cheaper option than an online payday loan. The annual percentage rate of interest (APR) is often under 36% and there’s a variety of lenders out there to choose from. The application process can be longer and it may take you a few days to receive the funds but these options are often far less predatory than online payday loans.

Installment loans. A Possible loan is an installment loan but there are other lenders that also installment loans. These loans are often up to a year in length and carry APRs that are higher than personal loans and credit cards but lower than online payday loans. Installment loan lenders may or may not check your credit score. However, check your lender carefully and make sure you’re not paying a huge APR - if you are, you could be making almost all interest payments during the first few months of the loan!

Pawnshops. Pawnshops will offer you a secured loan in which if you can’t repay back the loan, the pawn shop will keep the asset you “pawned” to get the loan. Interest rates are high but usually not as high as an online payday loan, which is unsecured. Make sure you’re able to repay the loan from a pawn shop or you may never get the valuable possessions you pawned back again!

Friends and family. Borrowing from friends or family can be cheaper and easier than online payday loan options. Be sure to draft up an agreement (you can find these online!) to hold both sides accountable and not get yourself into a sticky situation with those you care about. Approach any loan from a friend or family member as if from a lender or financial institution. Keep your promises, repay on time, and maintain a healthy relationship with who you’re borrowing the money from.

What happens if you can’t pay back an instant online payday loan?

You’re not alone if you can’t repay your online payday loan. There’s many people in the US in your shoes and you’ll expect the lender to contact you in increasing frequency and severity. At some point, the lender may pass your loan to a collections agency to follow up with you further.

Not paying back on time can have these consequences and more:

  1. Extra fees and interest
  2. Credit score decreasing
  3. Difficulty obtaining future loans
  4. Higher stress
  5. Criminal prosecution (in some states)

Don’t take out a loan if you don’t think you can pay it back. These consequences aren’t worth it!

However, there are a few things you can do such as asking for a grace period or an extended payment plan, settling, or rolling over (in some states). Beware of abusive collection practices and know the laws in your state so the lender cannot take advantage of your situation.

You can read more about what to do if you can’t repay a loan and how Possible Finance approaches defaults here.

Regulations for online payday loans

Payday loans are regulated at the state level rather than nationally. Each state is different and some states have outlawed payday loans completely such as New York, New Jersey, and Georgia. There’s a lot of information online about the regulations in each state at paydayloaninfo.org.

Final verdict

Online payday loans can be a useful form of short-term borrowing that’s fast, easy, and makes ends meet in an emergency. But research your lender carefully, know the interest you’re paying, and understand all your options before taking out a loan. Online payday loans are more expensive than credit cards, personal loans, and many installment loans so getting money quickly into your hands, regardless of your credit score, has a high cost!
Check out Possible Finance if you have bad credit and need money quickly. Get up to $500 even with bad credit, repay over multiple months, and build credit history!

Chang Fu

Chang is an avid writer, among other things, at Possible. He grew up loving reading and writing, creating his own poems and even a book he's now hidden in an old closet, unpublished. His financial experience at a large bank along with his passion for technology to help underserved communities inspires him to write for Possible.

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