Do I Need a Collateral for a Payday Loan?


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I intend to borrow some money from an online lender, but first I would like to know if i need a collateral for a payday loan? Should I have a property to qualify for an online short-term loan?
– Monica


Answer

The payday loan is identified as a loan with minimum requirements for borrowers. A simple application process gives to payday loans significant advantages over other types of loans.

Payday Loans Are Unsecured - no Collateral is Needed

Another advantage of applying for a payday loan as opposed to a car title loan or some other types of loans is that you do not need to offer up collateral.

This means that the payday loan is classified as an "unsecured" loan, as opposed to a "secured" one.

Tip
The fact that payday loans are unsecured does NOT mean that they are not risky, however.

What is Needed As an Alternative for Collateral

If you cannot pay back your loan on time, the lender will not be able to seize your property (your car, your house, etc.). As a guarantee of the loan repayment, the lender will ask you for admission to take the money directly from your bank account. In orther words, a ACH Authorization is needed.

You will not qualify for a loan unless you have an active bank account. You will not be given an allowance unless you provide ACH authorization.

With ACH authorization, the lender can withdraw the amount of the loan and interest owed on the due date from your account.

If the lender is unable to withdraw this full amount, they may charge you one or more fees.

Keep in mind! Your bank or credit union may also charge you non-sufficient funds or overdraft fees.

So even though you do not need to secure a payday loan with collateral, it is of vital importance to make sure that you can afford to pay back the loan on time and in full.

Reviewed by: Casey Bond
Date Reviewed: July 22, 2019


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The answer on this page is provided in collaboration with some of our trusted lenders who are proud members of the Online Lender's Alliance. The purpose of the provided answers is to inform the consumers about the specifics of online lending. It should not be treated as legal advice or regulatory guidance. The information is updated periodically and may include links or references to third-party resources or content. SDL365 does not endorse any third-party nor does it guarantee the accuracy of the third-party information. We encourage you to consult other resources that might serve your needs and take into account your particular situation.

 

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