If you’ve run into a financial emergency – your car broke down, and you need it fixed for work, or you need to make an emergency repair on your house – you may have considered online payday loans, short-term loans that you can repay out of your next paycheck. Unlike a traditional bank loan, payday loans don’t require an extensive application process or a stellar credit score. Instead, you just need a job!
Many payday lenders will offer the loan money on a prepaid debit card, which can be more secure than just handing over cash. If this is something that you think you need, it’s essential to understand how the process works.
How a Prepaid Debit Card Payday Loan Works
The application for online payday loans is like those of many other short-term loans. First, compare different lenders to find the one that best meets your needs, then follow the application process online. Check that the website is secure before applying so your personal data isn’t compromised.
Once approved, the online payday loan company will load the funds onto a prepaid debit card for you. Or some lenders even have virtual debit cards, where you can pay using a virtual card instead of a physical one.
Most prepaid debit cards for these loans are affiliated with either Visa or MasterCard. So you can use them anywhere these cards are accepted and pay your bills, too.
Keep the debit card you’re given because you may be able to use it again if you need a loan from an online payday loan company in the future. And you may even be able to get direct deposits on the card, like from your employer, or even get government benefits and your tax refund loaded onto it!
You may not be able to repay a loan with your prepaid debit card, though – the terms for each lender vary. Check with your lender for repayment options.
Four Great Reasons to Consider Online Payday Loans with a Prepaid Debit Card
There are several ways that people can benefit from this type of loan and payment type:
- Easily access your funds, shop in stores, and even get cash from ATMs
- Set your prepaid debit card up for other deposits, so your money is all in one place
- Earn rewards – some prepaid cards offer cash rewards when you use the card at different locations
- Choose from multiple lenders to find the best loan terms for you
Are There any Drawbacks For Online Payday Loans?
Before taking out any loan, whether a payday or a traditional bank loan, make sure you can handle the repayment terms, including interest. Look at your budget to make sure that you can make your payments on time each month and will be able to fulfill the terms you agree to.
Some unique possible drawbacks for payday loans, depending on the lender, may be:
- It may have higher fees than a bank
- Shorter repayment terms – these are intended to be short-term loans you pay off quickly
- Disreputable lenders – make sure that you only borrow from a secure, trusted lender
Payday lenders must have a license to operate in your state, so it should be displayed in the physical store and online. If you don’t see a license number or the lender can’t provide one, seek a more reputable, licensed lender instead.
Other Considerations About Online Payday Loans to Keep in Mind
An online payday loan that provides funds through a prepaid debit card is not the same as a debit card cash advance. Prepaid debit cards from an online lender have the total amount you borrowed available to spend on the card, and then you pay that amount back a little at a time.
A debit card cash advance is when you overdraw your bank account using your debit card and then incur an overdraft fee from the bank for the advance. The average overdraft fee is about $35. Many banks also charge weekly fees (or even daily!) if you continue to have a negative balance in your checking account.
Payday loans often have a one-time fee and no penalties if you pay the loan back on time. Overdrafting your bank account, on the other hand, not only can get expensive as fees add up, but you could also jeopardize your standing with the bank – they could close your account for overdrawing it!
How to Apply For an Online Payday Loan
Each online lender will have a slightly different application process but may often ask for the same things. In addition, the application module will guide you through the paperwork when you apply online, so you don’t have to stress about what each blank means. And many sites have online chatbots for customer service if you have questions.
You will have to meet the lender’s eligibility requirements, which can include the following:
- Having a reliable source of income (you may need your last few check stubs to apply)
- Be a U.S. citizen or legal resident
- Be at least 18 years of age
Lenders will ask for this information, so have it ready when you apply:
- Date of birth
- Social security number
- Driver’s license or government ID number
- Your employment details and verification that you work there
Your application may be denied if you cannot provide the information above or have insufficient income for the amount you’re asking to borrow. The rejection reason can also be if you have defaulted on a payday loan in the past.
A prepaid debit card has a lot of benefits, including being a great way to get your funds from an online payday loan. However, be mindful that you can pay back the loan amount without being late on your payments. And always secure your prepaid debit card so it doesn’t get lost or stolen.