Payday loans are short-term loans meant to cover expenses until your next paycheck. But what if your income comes from government benefits and not a job? You may still be eligible to apply, but there are a few extra considerations. Here are six things to think about before getting a payday loan if you receive welfare benefits from public funds.
Benefits Might Count as Income
When it comes to what to know about payday loans and welfare, the first aspect is whether you even qualify. Typically, payday lenders ask for proof of income to show that you can repay what you owe. In most cases, that means a job. However, some lenders accept financial assistance from the government in place of a salary. This covers things like pensions, disability, housing, or child benefits.
You Can’t Be Denied Just for Receiving Benefits
Receiving government support doesn’t automatically disqualify you from applying for a payday loan. However, the situation varies between lenders. Some may require a certain amount of employment income, while others have more relaxed eligibility criteria. Generally speaking, they’ll look at your full financial picture. You’ll likely need to meet minimum income thresholds, regardless of the source of your income.
Loan Amounts May Be Lower
Payday loans tend to have a relatively low limit on how much you can borrow, in part because of their short-term nature and high interest rates. The amount depends on the state. For example, in California, the upper limit is $300 while in Missouri it’s $500. Some states have outlawed payday loans entirely, like Georgia, Arkansas, and Arizona. Others have much higher maximum loan amounts, like $1,000 in Delaware, $2,500 in Virginia, and $50,000 in Oregon.
APRs Can Be High
Payday loans are known for steep interest rates which can dramatically increase the amount you’ll owe compared to how much you initially borrow. The interest is expressed by an annual percentage rate (APR), which can reach triple digits. Most states limit the maximum APR. For example, in Ohio it’s set at 28%. Even so, if you miss the repayment date, fees can add up fast. Always be sure to read the fine print and calculate whether repayment is feasible based on your income.
You Can Apply Online
You no longer need to find a physical lender to get emergency cash. Whether you need to cover sudden medical bills or other unexpected costs, most payday loan applications can now be done online, usually in just a few minutes. Different lenders have different requirements, but most of the time you can expect to need your ID, banking details, and proof of income (like payslips or welfare benefits documentation).
The approval process is often quick, too. In some cases, the loan can hit your account in as little as 15 minutes. This can be a life-saver in a financial crisis. However, it’s still important to note: you should never rush into a payday loan. Always check the lender is licensed and take your time reading the terms.
Endnote
Payday loans can provide short-term financial relief in emergency situations, even if your income is from government-funded benefits. Due to the loans’ high interest rates, it’s vital you carefully consider the terms before taking one out. If you’re receiving welfare payments, that becomes even more critical. Check the repayment schedule thoroughly to ensure you can manage it. Ultimately, payday loans can be a helpful tool when used carefully, whether your next paycheck is from an employer or social security.
