How many payday loans can you have at once
Where do you always turn to when you need cash urgently? Many people seek refuge from payday lenders. Ideally, payday loans are meant to help individuals deal with emergencies. These are short term loans that are supposed to be paid back by the next payday. They are actually the quickest loans, and that is why many people turn to them when faced with emergencies. It takes a short time to be approved as well as for the loan to be processed. These loans are readily available online. You only need a connection to the internet to check the option that suits you. In case you need funds, make sure to check best personal loan online without visiting the lender’s office.
The eligibility requirements for payday loans are not as stringent as the case with traditional loans. Most payday lenders conduct partial credit checks. To qualify for a payday loan, you are only supposed to be of legal age, have a working bank account, and a stable source of income. But what if a single payday loan does not cover your expenses in full? Is it possible to apply again for another loan? Well, this an interesting question and no doubt you want to get the answer. This blog discusses in detail payday loans.
The number of payday loans that you can have at once
When it comes to the number of loans that an individual can have, there are no set limits. There are many lenders out there that actually offer multiple loans. If the borrower meets the requirements, and the lender is willing to give, no restrictions are there. Does this apply to payday loans? You can borrow more than one payday loan either from the same lender or from different ones. I am aware of individuals who have always taken up to four different payday loans at once. The point is, as long as you pass the eligibility tests, no one can limit you on the number of loans that you can have at once. In fact, payday lenders will be happy to find such a customer because it means a lot of profits to them in the form of interest rates
Is it a nice idea?
The fact that you can qualify for a number of payday loans at once does not mean you should actually go for them. There are so many factors to consider. Even individuals with good incomes have struggled to get out of payday loans. In case of unforeseen costs, you can suffer a lot, especially when keeping up with payments becomes difficult. The following points show why you don’t have to take several payday loans.
Payday loans are meant to be short term
Just as we defined it at the outset, a payday loan is a short-term loan. That is precisely how the loans should be taken to be. You are supposed to think of them in case you urgently need funds, and you have exhausted all the possible sources, including taking funds from your savings accounts or borrowing from friends and family members.
If you keep taking payday loans, there are chances of getting overwhelmed. These loans are expensive, and that is the reason why you should never consider them for solving long term financial issues. You may find yourself borrowing from other sources to repay other lenders.
The loans have an average APR of 400% and can rise even up to 1,000% in case the borrower keeps rolling over. Imagine having such an expensive loan, and you are expected to pay within two to four weeks! Here is what happens – you make a payment and remain with nothing to cover your expenses until the next paycheck. To keep going, you will have to reapply again. As a result, you will end up in a vicious cycle of debt.
Lenders often allow rolling over a loan in case one cannot make the payment once as expected. However, this option will only make the loan even more expensive and difficult to deal with. A loan of $100 often carries a rollover fee of $30. Isn’t this too much? If you must borrow, use it the way it is supposed to be used – short term solutions to financial emergencies.
Your credit rating may be negatively affected
The way payday loans are designed, a single application will attract a number of inquiries on your credit. This will adversely affect your score. Usually, a marker is left on the borrower’s credit report in case the lender makes a hard inquiry. The marker will be reflected on your score for up to 24v months, though the effect will be felt for 6-12 months. Also, lenders will be able to see the number of applications you have made, something may not implicate you well.
You may not qualify for future loans
Applying for several payday loans have the effect of lowering your debt to income ratio. This ratio is calculated by taking your overall monthly debt and dividing it by your monthly income. Lenders often grant loans to individuals with a maximum of 36%. In case your income remains constant, taking another payday loan will enlarge the numerator, and therefore the whole ratio will increase. With a high debt to income ratio, you will be perceived as a high-risk borrower. Also, credit bureaus use debt to income ratio to compute credit score, and that is why it is advisable to keep it as low as possible.
The bottom line
You can have as many payday loans as you want provided you meet the requirements put forward by lenders. There is no set limit when it comes to the number of loans that one can take. However, taking several payday loans is not a nice idea. We have discussed several ways in which you can be affected. What can you do instead of applying for another loan? You have other alternatives to explore. For instance, you can sell the stuff that you currently don’t need. Alternatively, you can consider borrowing from family members and friends or cut on your budget.
