What's Your Question: Payday Loans

Q. Do payday lenders require a credit check?   

A. Many storefront lenders use the electronic payday credit bureau, Teletrac, which computes a score based on the borrower’s income and checking account information. Payday lenders do not request credit information from any of the major credit bureaus (Equifax, Experian, or TransUnion).

Q. Can using a payday loan affect my credit score?

A. Delinquent or defaulted payday loans are not reported to any of the three major credit bureaus and do not directly affect a credit score. However, if repaying a payday loan causes you to miss other payments (e.g., a credit card or car payment) and those delinquencies are reported to the major credit bureaus, your credit score will be affected.

Q. Is it safe to apply for a payday loan online?

A. There are risks associated with providing personal information over the Internet, and they may increase if you a use a payday lending website that specializes in finding customers for lenders. Such sites collect customer information, including Social Security and checking account numbers, and then share this information with a network of potential lenders before one lender accepts the loan.

Q. What happens if I opt out of overdraft protection for my checking account and the check I provided the payday lender is cashed but I don’t have enough money in my account to cover it?

A. If you have a bounced check—that is, if your account does not have enough money to cover a check−you may be assessed a returned check fee by the payday lender as well as an overdraft fee by the bank.

Q. Can I get a payday loan if I am unemployed?

A. Maybe. Lenders may approve a loan if there is proof of alternative sources of income such as a pension or Social Security or unemployment benefits.

Q. How does the Military Lending Act of 2006 affect payday loans for people in the military?

A. The act sets the following restrictions on payday loans to active-duty personnel and their dependents: Loan fees may not surpass 36 percent APR, and lenders may not secure the loan with a personal check from the borrower, debit authorization, wage allotment, or title to a vehicle. SOURCE: Center for Responsible Lending (2006, p. 1).

Q. What is the legal age to get a payday loan?

A. Payday borrowers must be at least 18 years old.

Q. Can I get a payday loan if I have a savings account but no checking account?

A. Yes, some lenders may choose to lend to a borrower who has only a savings account.


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