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You may be in a tight financial situation and thinking about an online payday loan to make ends meet.
A Cash advance Payday loan may be the last option for some with bad or no credit and at least it is an option, you may say.
However, these are costly choices, specially if you get into one of these loans and don’t know what you’re signing for.
So, if you’re looking for a quick Payday loan, an online payday loan or a Prepaid card payday loan, just know what they’re about.
Check out these 7 facts about Payday loans in general and more specifically ones with a prepaid cards or no checking account loans.
Also, see alternatives you have to taking out a no credit check Payday loan.
1.Payday loans are short term loans based on your income and credit profile
Times can get hard for everyone specially when things happen outside your control, like a layoff or an illness. If we did’t plan for emergencies, we may be faced with limited choices, like taking out short term high interest loans.
Payday loans are very short term loans, typically two weeks long to cover you until the next paycheck. For some people these loans are the only choices to pay for necessities until the next paycheck.
These loans are supposed to be used for emergency situations, however many borrowers use them as a longer term alternative.
Payday lenders use your income and credit profile, not necessarily credit scores, to decide on amount and interest rate for the loan.
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2.Payday loans are legal in some States and Illegal in Others
Sometime ago the Payday loans industry went thru a lot of changes. Some of these changes rendered these loans illegal in some States, other States only amended their laws to make them more transparent.
For a list of States where Payday lending or short term lending is illegal and where they are legal see at the bottom of this post under Resources.

3.People who take Payday loans often use them the wrong way
If you need a short term loan to buy food or for other essential necessities, there is no wrong use of money.
However, if you get hooked on short term high interest rates loans to pay for necessities, you’re using them the wrong way.
The average Payday loan carries about 1.5 times in interest. This means if you borrow $400, you’ll end up paying a total of $1,000. Principal of $400, plus interest of $600 on average.
Managing your money and credit with these loans is a sure way to ruin your credit for a long time.
Related: 100+ Financial Assistance resources and programs
4. You don’t need good credit to get a Payday loan, But……………
Payday lenders usually don’t mind your credit score and don’t require a good credit history. Lenders do use your credit information to set interest rates.
Watch out for the lending agreement. Most payday lenders require you to have a bank account and they require access to it.
Your permission will likely be given in the Payday loan application. Usually in the small prints. If you don’t pay, the lender may be able to deduct from your bank account.
5. You can get a Payday loan with no checking account, instead you can use a prepaid debit card to receive the cash
Payday lenders typically fund the loans and deposit the money on your bank account. This can be a checking or saving account. There are a lot of people who don’t have an account at a bank.
For the unbanked, some lenders offer to have the deposits go to a prepaid card. However, not all short term lenders offer this option.
If you do find a lender providing prepaid cards this is how it works. Once you get approved for the Payday loan you’ll get a prepaid card that you can use to make purchases where ever the card is accepted. You can use this card for online purchases also.
The lender provides the prepaid card with the usual security feature like a PIN. For using the Payday loan prepaid card at a vendor, you’ll need to show your ID.

6. Payday loans are very expensive
Like I mentioned above, these loans carry high interest rates, they’re expensive. The reason Payday loans are so high is because they are extended to people with bad credit history.
If you have a history of missing credit card payments or not paying at all, this will be reflected on your credit profile. Traditional lenders, like banks will not be lending to you because of the risk of default.
Given the fact that there is a market for loans that don’t require a good credit history, Payday lenders are willing to take the risk in exchange for higher interest rate.
7. Payday loans should be paid in two weeks, on average lenders are in debt for 175 days
This short terms loans usually have a two weeks due date. However, because of loans roll overs and flipping, the lender may end up in debt for much longer.
Part of the reason is that the borrower often takes a new loan to pay for the original loan. This rollover process leaves the borrower in a debt trap, continuously borrowing to pay for old debt.
Other options to Payday loans
Finding alternatives to a short term loan is not easy. Borrowers who are looking into these loans generally have made some credit mistakes in the past. For this reason, now they’re seen as high risk.
There are options to Payday loans worth considering first. Here are a few debt tips.
- Negotiate a payment plan of old debt with your credit card company and then take a cash advance.
- Try a bank personal loan instead. Maybe a large bank won’t give you credit, but a smaller community bank or credit union would.
- If you have a 401k plan linked to your job or prior job, take money or a loan from the plan first.
- Try a peer-to-peer lending platform, like Lending Club or Prosper.
- Cut down your expenses.
- Get help from local and non profit hardship programs
- Sign up for consumer counseling to learn how to manage your debts and how to pay less monthly.
- Work side hustle jobs for extra income.
Final Thoughts
Payday loans are expensive and they’ve been found to be often used by predatory lenders.
Before taking a fast or direct lender Payday loan, consider other alternatives.
If everything else fails and you need a Payday loan as last alternative, try to pay it as soon as it’s due. This way you avoid high fees and also avoid a new loan.
Resources:
Where are Payday loans illegal?
This map has a list of States where Payday loans are legal and where they are illegal and where high interest rates are allow for short term loans.
Who and why take out Payday loans?
This Pew’s study has information on the average payday loan amount, the average interest paid and how are people using these short term loans.

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