Loans

Loans Over the Phone

Sometimes, our bills can’t wait for the next paycheck to hit that bank account. Because of that fact, many people are discovering that a payday loan can provide the quick cash financial relief they are looking for. But many dangers come along with payday loans, so beware. If you’re in search of loans over the phone, read on to learn more!

One of the best ways to get a virtually hassle-free cash advance is with a payday loan. With thousands of payday lenders available, people can avoid the rates and terms of traditional lenders like banks.

Whether it’s through a live conversation, website, or app, fast payday loans over the phone are easy to come by. And in this article, we’ll show you how the solution to your short-term cash problem may be in the palm of your hand.   

What Is a Payday Loan?

A payday loan is essentially a cash advance on a person’s upcoming paycheck. They’re short-term loans for short-term cash flow problems. The usual payday loan amount is $500 or less. 

Payday loans have bridged payroll gaps for many people to meet financial obligations that are due before their money is available. Payday loans also come in handy for unexpected expenses like car or home repairs or medical emergencies.   

Here’s how they work:  

A borrower goes to a payday lender and completes an application. If approved, the borrower writes a check (or authorizes a withdrawal from their bank account) for the amount they want to borrow, plus any of the lender’s fees and interest. The payday lender then gives the borrower the loan amount. While a loan from a bank may take seven to ten business days to process, a payday lender can put cash in your hands in a matter of hours. For payday loans over the phone or a mobile device, funds can usually show up on the same day.  

At the end of the loan term (usually about 14 days), the lender cashes the borrower’s check or posts the withdrawal to their bank account. 

Mobile Loan Applications 

Many payday lenders and other financial institutions allow applicants to apply for a loan online. For borrowers that may not have access to a laptop or desktop computer—or don’t want to use one—you can also complete an application online. Loan applications can be accessed through a web browser on the device or by downloading the lender’s app from a trusted source (like Google Play or the App Store). 

What Do You Need To Apply for a Loan Over the Phone?

A payday loan is famous for its speedy loan application process and its relatively minimal need for documents. For the most part, you can get a payday loan by having just the following available:  

Government Issued ID

You can apply for a payday loan using a state-issued driver’s license, state ID, or a passport. The ID will need to have a photo and list your legal name. 

Social Security Number 

There’s a chance it’s not on your ID. In that case, some payday lenders may require a Social Security Card or other government-issued documents that have your Social Security number, like a W-2 tax form.   

Proof of Income

Be ready to produce pay stubs from the last two or three pay periods. If you work for yourself, you can provide your tax records (like Form 1099) and a history of your bank deposits over the last two months.  

Active Checking Account 

Ideally, your checking account should not be overdrawn. This is the account that the lender will draw from when repayment is due. 

Personal Checks 

You may need to write a personal check to allow the lender to withdraw the money. 

Valid Email Address 

Your lender will send all of your important documents—like the loan agreement and terms—to this address. A valid email is required to apply for payday loans over the phone.   

Your Phone 

Naturally, to get a payday loan over the phone, you will need a reliable mobile phone or mobile device. Before you start looking for any loans, make sure that your device is updated with the latest version of its operating system. That way, you’ll have all the available protection against any threats or viruses.  

Today’s smartphones can access any website, and lots of cash advance loan lenders have apps that can be downloaded at no cost from any mobile app store. However, if you decide to download any app from a payday loan lender, be sure that you don’t fly through the terms, conditions, and allowances. Even though applying for a loan over the phone is relatively simple, remember that you provide some of your most sensitive personal information to private companies. You must know how this data will be used and protected. 

Some people are not comfortable dealing with an online application process or using mobile technology, especially when providing personal financial information. Nearly all payday lenders have toll-free numbers available for anyone who wants to use a landline and speak with a live operator. It will most likely take a bit longer than applying online or through an app, but speaking with a person can provide an opportunity to ask questions about the process.

Bad Credit? Try Getting a Loan Over the Phone 

In addition to being one of the fastest ways to get a cash advance, payday loans are one of the best solutions for people who have not-so-good or even bad credit. Payday lenders rarely perform credit checks. Having bad credit is what keeps people out of favor with traditional lenders like banks. Overall, a payday lender’s primary concern is that you have the means to repay the cash you are borrowing.   

How do You Know If You Have Bad Credit?

For the most part, we know that having a good credit score is better than having a bad credit score. But, many people don’t even know what makes up their score, much less what their score is. 

A credit score is a number that illustrates the level of risk that a lender will take if they choose to loan money to a borrower. It is calculated by companies called credit bureaus. These companies analyze your spending habits and relationships with your past and current lenders and creditors and make their findings available to businesses and consumers. The three major bureaus in the United States are Experian, Equifax, and TransUnion. These companies make their results available through credit reports. For example, if you have ever rented a home, bought a car, applied/owned a credit card, or even had a utility bill in your name, there is a credit report available on you. The information can be made available to any business through a credit check.  

These are the five significant factors detailed in your credit report, and each of them bears weight on determining your score. Here they are below, with that weight listed in percentages: 

Payment History (35%)  

Your payment history is the most critical factor in determining your score. Why? Because above all the other factors, it presents a clear record of the bills you have paid—and the bills you haven’t paid. Any delinquent accounts or late payments, if reported to the credit bureaus, will harm your credit. This is why paying your bills on time is so vital to your financial health. 

Credit Utilization (30%) 

Credit utilization is a ratio that measures the amount of credit you’re using against the total amount that is available to you. For example, let’s say you have two accounts that give you a total of $1,000 in available credit. Between the two cards, you have a balance of $250. That makes your utilization ratio is 250:1000, or 25%. Keeping your utilization to 30% and below will help to keep your score higher. A lower utilization ratio shows lenders that you know how to manage your accounts wisely, which means that you are more likely to repay their loan. 

Credit History (15%) 

This is the record of all your current and past accounts. A long history shows that you have managed credit over some time and can show lenders that you have successfully secured and maintained accounts. 

New Credit (10%) 

Applying for a new credit account tells potential lenders that you may need some financial assistance. However, using several new versions (like credit cards, for example) in a short period may be a sign of severe economic trouble that will prohibit you from repaying a loan.  

Credit Mix (10%) 

Credit mix refers to the different types of accounts you have. Maintaining a mortgage and a credit card, for example, can prove that you can keep up with both regular and varying monthly payments. 

Based on all this information, your score is calculated as a three-digit number between 300-850: 

  • 800-850: Excellent
  • 740-799: Very Good
  • 670-739: Good
  • 580-669: Fair 
  • 300-579: Poor/Bad

With 20 percent of Americans living with bad credit, payday loans are a popular option for their viability and ease. And with payday loans over the phone becoming more readily available, the number of people using these fast cash loan options is almost certain to rise. 

Understanding Payday Loans 

A payday loan is often advertised as quick and convenient. But, it is essential to know all the facts.   

Payday loans are unsecured loans that don’t need any collateral or credit checks to acquire. This means these loans can be risky for the lender. That risk is covered in interest rates and higher fees than those found at banks. 

Payday loans work best when the borrower can repay the principal, fees, and interest on the loan within the terms of the loan agreement. Remember, a typical term agreement for a borrower is only the length of a standard pay period (14 days). However, the reality is that many people who are getting payday loans are already dealing with financial stress due to bills that they can’t currently afford.

After taking care of their essential needs (like food, housing, and utilities), there are little to no extra funds to cover the loan payments. This is why nearly 46 percent of people who get payday loans end up defaulting—or failing to hold up their end of a loan agreement by repaying on time. 

When this default happens, payday loans are typically rolled over into new loans. While it seems like a relief that gives a borrower more time to pay off the loan, it creates more debt. 

The Danger of Payday Loans

Let’s take a look at this example. Imagine that you take out a payday loan of $500 with a 25% annual percentage rate (APR). That means that at the end of the loan term, you owe the lender $625. You cannot pay this amount, so you default on the loan. The payday lender opens up a new loan for you at the same rate. 

Many people don’t understand that the interest due on this new loan is based on the total amount you owe, not the original loan amount. That means that you now owe just over $781—more than 50% of the actual loan amount. If the loan is unpaid at the end of another loan term, the borrower is looking at a balance of $976! Moreover, some payday lenders do their best to hide these conditions behind tons of legal jargon and fine print, all while they pull your much-needed funds from your bank account.

To combat fraud, government agencies like the Consumer Financial Protection Bureau enforce laws that protect consumers, including caps on payday loan interest rates and limits on how many times a payday loan company can attempt to collect repayment. Further action and regulations are also different in each state, so check to make sure you know the laws where you live.

After considering the ins and outs of payday loans, you may not think that the risks and fees associated with them are worth the quick cash relief they can bring. However, that cash flow problem still exists. If payday loans aren’t for you, consider a couple of other options: 

Friends and Family Loan  

A loan from a friend or family member avoids the hassle and restricts information from a credit check and loan application process. And if they like you, you could borrow cash with little to no interest! 

Personal Loan 

As an unsecured loan, payday loans are high-risk, and therefore more expensive to the borrower. A personal loan that includes collateral (like a house or car) will have lower interest rates and better terms for those with a decent credit score. Contact your bank or credit union to explore your options.  

The Bottom Line…

In summary, mobile phones have changed the way we do just about everything. It is now possible to apply and secure a personal loan in just a few minutes that can help pull you out of a financial crisis.

But taking advantage of the convenience of mobile loans doesn’t mean that you don’t have to do the homework and research you would do before filling out any loan application. Remember that a loan is more than just a solution to a “right now” problem—it could be a part of your life for weeks or months. So, before you hit “send” to apply for any loans over the phone, don’t forget to shop around, compare rates, and understand the terms of any financial commitment you take on.  

References:

Personal Loans What Are the Basic Requirements to Qualify for a Payday Loan?

Consumer Financial Protection Bureau (CFPB) Definition

15+ Payday Loan Statistics for 2021

Study finds high default rates in payday lending