Before you submit your application, it’s always worth checking: is the short term loan you’re applying for legit? We take you through what you need to know.
While short term loans, also known as payday loans, can give you fast access to money when you need it, it’s important to deal with legitimate lenders. Payday loans aren’t legal in every state, and if they are legal, they must abide by state-specific rules and regulations.
Legitimate payday loans are provided by lenders that have all required licenses in place. State regulations govern features like maximum interest rates, fees and loan terms.
Read our guide to find out how you can make sure you are dealing with a legit lender and that the loan you are applying for is the real deal.
LendUp Payday Loans
Apply for a payday loan conveniently online and borrow between $100 and $250.
- Min. loan amount: $100
- Loan term: 7–30 days
- Total costs: Depends on your state, loan product, loan amount and the term of the loan.
- Must be 18+ (19+ in Alabama)
- No security deposit needed
- Confidential and secure
- Visit the site to see if available in your state
What is a “legit” short term loan?
Short term loans typically need to be repaid by your next payday. A “legit” payday loan is one that is offered to you legally, meaning the lender abides by all regulations set by your state, even if you are temporarily in somewhere else. Short term loans can be applied for online and in-store, but all fall under the same regulations.
Generally, short term lenders have more relaxed criteria than banks and other lenders. You will be able to apply for a short term loan if you have bad credit, are on a lower income or receive government benefits. This relaxed eligibility criteria does mean rates and fees are higher than other loans, but lenders still have to stick to the state-mandated APR.
The 'ability to repay' rule
Lenders must make a reasonable judgment on an applicant’s ability to repay the loan. The lender should assess factors such as income, housing expenses and existing debt in determining if the applicant can reasonably repay the loan.
If a lender doesn’t ask you for any of that information or doesn’t attempt to evaluate if you can afford the loan, the lender probably isn’t legit.
A selection of loans you can consider applying for
Check the websites of any providers you’re interested in to confirm they operate in your state of residence.
Three things to look for in a legit short-term loan
The following should help you find legit short term loans easily:
- Better Business Bureau accreditation. The Better Business Bureau (BBB) is more than a century-old nonprofit organization that helps identify trustworthy business. Different short term lenders across the country have BBB accreditation, and dealing with these businesses provides extra peace of mind.
- Contact details. If you’re looking for online legit short term loans, take some time to find a lender’s contact details. If a lender provides no more than a contact form or an email address, see how responsive they are before you apply. A legitimate short term lender should not shy away from providing a physical address, phone support or live chat.
- Fees and charges. Direct lenders of legit short term loans are upfront about the fees and charges you have to pay during the loan term, and they adhere to all given maximum limits. The loan contract should clearly set out all applicable fees and charges.
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Benefits of a legit short term loan
If you want to find a legit short term loan, keep an eye out for the following features:
- Abides by state regulations. With legit payday loans, you don’t have to worry about lenders charging you more than the maximum limits set by the state. Check what the regulations are in your state to see if your lender is operating legally.
- Multiple options. You can get in touch with direct lenders of legit short term loans, and you can go through a loan matching service. Sites such as finder.com that offer reviews of lenders can help you find legit lenders to apply with.
- Bad credit is OK. Many lenders provide legit short term loans for bad credit, and while they may run a credit check, they focus more on your ability to manage the loan repayments.
- Quick access to funds. If you apply in-store, you can get cash almost as soon as a lender approves your application. With online legit short term loans, the money is transferred into your bank account after you accept the loan contract, usually within one business day.
- Use money for any reason. Short term lenders don’t place any stipulations on how you can use loan funds as long as you’re using the money for legitimate reasons.
Don has a costly vet billDon has heard the horror stories with payday loans — those scams run by con men online. But when he finds a stray puppy and takes it to the local vet for shots, he spends more than he thought he would, leaving him strapped for cash for the rest of his monthly expenses.
Don has bad credit from when he was younger and isn’t current on some credit card bills, so he doesn’t have a large line of credit. Traditional banks don’t lend small amounts of money, so Don thought he was stuck.
Instead of giving up, Don heads online and looks up how to tell if a lender is legit or not. He compares different types of short-term loans and determines that, since they’re legal in his state and many are part of the Online Lender’s Alliance (OLA), it’s a good deal for him.
He takes out a $200 payday loan with a reputable lender and works the costs into his next month’s budget.
Some more considerations before you apply
You’ll have to pay additional fees if you make a late payment or miss one entirely, and your lender may report your payments to credit bureaus. Reconsider applying if you think you may have troubles repaying your borrowed funds.
Take some time to go through the loan’s terms and conditions, as this document tells you how much you may have to pay in different circumstances such as rollovers and late payments. Some states don’t allow you to refinance a loan or take out more than one within a given period of time. If your lender says you can, they may not be trustworthy.
Are payday loans available in my state?
Compare short term loans in your state
Frequently asked questions
What is a payday loan?
Is there anything I should know before taking out a short term loan?
There are a few things you should know about payday loans in order to make the right decision for you and your family. First, you should generally only take out a payday loan in emergency situations because this type of loan is typically a short-term, one-time solution. If you have structural financial problems that cause you to have difficulty repaying debts, you should consider credit counseling.
Second, you’ll want to make sure you can repay your loan in a timely manner. Missing the due date on your repayment will result in additional charges. Avoid digging yourself into a deeper financial hole by taking on debt you can’t afford.
Third, before accepting a loan, be sure to read the lender’s terms and conditions carefully. It’s important to read the fine print so you know exactly what you are paying and when it is due.
Payday loans aren't legal in my state, but I’ve found an out-of-state lender willing to provide me a loan. Is this legit?
No. A lender should have a license to operate in each state, and if your state does not permit payday loans, then the license will not be legal. You may be able to consider getting an installment loan or an auto title loan instead.
What eligibility criteria do I have to meet to apply for a legit short term loan?
You should be US citizen or a permanent resident and you should have a regular source of income. You should also meet your state’s minimum age requirement.
Are there legit lenders that offer short terms with no bank account required?
Yes. Some legit lenders offer alternative ways to receive your loan funds such as prepaid debit card loans or picking up your cash at a nearby store.
What information do I have to provide to apply?
You’ll have to provide your name, contact details, Social Security number, employment details and income details. If you’re applying online, you’ll need to provide your bank account details as well.
Will taking out a payday loan affect my credit score?
Of course, if you find a lender who helps build credit, making your payments on time can build your credit score. If you know you can repay and feel comfortable working with the high APR and fees, you could possibly raise your credit score through a payday loan.