A check-cashing loan is a loan that offers borrowers the ability to access cash from a check without having the funds available in a checking account. Although a check-cashing loan sounds like it has to do with banking more than anything, you’ll find it is much closer to a Payday loan.
If you are considering getting one of these loans, you may be curious about where to start, what you need, and some pros and cons. Below is everything you need to know about a check-cashing loan.
How Exactly Do Check-Cashing Loans Work?
Check-cashing loans are pretty simple. As mentioned above, they work by providing individuals with funds who are looking to cash a check but don’t have the funds in their bank account. Or, in some cases, for borrowers who do not have a bank account at all. For this convenience, the borrowers will likely need to pay interest and, of course, repay the check funds. Loan amounts for check-cashing loans are usually limited to a few hundred dollars, similar to what a payday loan offers borrowers.
Repayment With Check-Cashing Loans
In most cases, repayment with check-cashing loans involves a single payment. This payment will include interest and the amount you borrowed—called the principal amount. Depending on your lender, you may be able to pay them online, over the phone, or in person, definitely ask for those details. Also, make sure to ask about the due date and be mindful, as missing a payment could hurt your score or increase your loan balance with late fees!
Where To Find Check-Cashing Loans?
In most cases, you may find check-cashing loans with lenders that operate in person. Usually, these lenders provide money transfers and general check-cashing services. You may also find check-cashing loans available with payday lenders that have brick-and-mortar locations. There also may be some retailers that offer these services. Remember that some places have more set restrictions than others regarding check types and amounts, so you should check before heading over.
What Do You Need for Check-Cashing Loans?
You’ll need a few different things with check cash loans (which are similar to what you may need for a payday loan); here are some things most lenders may ask for along with your valid check:
- A government-issued photo ID (You may have to meet a particular age requirement, which is usually 18).
- Proof of income/ability to pay back the loan(Your latest pay stub, Bank statement, whether you deposit your paycheck yourself or have direct deposit set up, etc., could work).
- Your social security card or ITIN.
Because every lender may have different practices, it may be helpful to call or email them (you should easily be able to find a contact phone number or email) about their process before you head in. That way, you can rest assured that you have everything you need from the get-go. Discussing things ahead will ensure everyone is on the same page, and the lender can answer any questions about your loan request.
A Step-by-Step Guide To Check-Cashing Loans
If you haven’t gotten a check-cashing loan before, you may be curious about what things will look like. Here is a step-by-step guide to check-cashing loans:
Step One: Gather Your Documents
The first step involves grabbing your documents. As mentioned above, you’ll likely need proof of income, a government-issued photo ID, and your social security card or ITIN.
Step Two: Head Over To a Lender
Next, you’ll have to head to your lender and talk to them about accessing your check amount via a check-cashing loan.
Step Three: Give Them the Check and Your Documents for Verification
They will ask for your information and the documents to verify things.
Step Four: Get Approval, and Your Cash
If approved. The lender will take the check, you’ll have to sign a loan contract, and you can get the funds. Approval will be largely based on income, so if you can’t prove income you could get denied—just like payday loan denial.
Some Pros and Cons of Check-Cashing Loans
Just like any loan, there are pros and cons with check cash loans that you should know about before you decide to take them out. Here are some advantages and disadvantages of these loans:
The Service Is Fast and Convenient for Customers
If you need speedy cash, then one of these loans may help. Because these loans offer only a small amount of funds, lenders are pretty fast with everything from application to funding.
You’ll Have to Likely Travel to a Store/Site/Location
Unfortunately, many check-cashing loan lenders only operate in person, which means having to make some time to drive out to them.
You Won’t Need a Ton To Be Eligible
Because of these loans’ simplicity, you will likely only need a few pieces of information and a few documents.
Check Cash Scams
There are so many different kinds of check-cashing loan scams, especially online. You may come across fraudulent websites, vendors, and even potential customers of your own if you have any sort of e-commerce set up.
When it comes to websites, verify the site owner and encryption before adding any information. When people reach out to you about cashing a check for them, never do so. They will often provide you with false error details or an error code from their “bank”. You would be surprised how common these scams are and how efficiently they operate and store your information, similar to a call or data center.
High Cost for a Small Amount
These loans may come with high costs, especially if you are comparing the amount of money you are able to borrow!
An Extremely Short-Term Loan
Like payday loans, check-cashing loans usually must be repaid in a few weeks. For many people, this may not be enough time to comfortably repay their loan, especially if they have just recovered from a financial emergency.
Personal Loans as Alternatives To Check-Cashing Loans
Regardless of good or bad credit, personal loans may be an option you want to consider. Generally, they could come with a fast process, flexible repayment with the right lender, and ease. And so, if you need money, quickly you may want to consider a personal loan over a check-cashing loan!