Payday loans offer a quick way to borrow cash for an unexpected expense. Maybe you have a furnace that suddenly died and is beyond repair, or maybe your septic has failed and needs to be replaced immediately. If you lack the cash, a payday loan is one way to get the cash you need without waiting weeks or months for your loan to be approved. If you’re on social security, payday loans for social security recipients are also possible. There are things to be aware of, however.
How a Payday Loan With Social Security Works
With any payday loan, you give your social security number, name, and contact information. As soon as you submit it, your loan is processed and approval is given in a matter of minutes. You do not need to fill out multiple pages on an application, as you would with a bank or credit union, and there is no credit check to slow down the process. It’s fast and easy, but you also need to enter into a payday loan with social security wisely.
Pay Close Attention to the Fees
People with social security as their sole income do not have excessive income to spend. If you take out a payday loan to cover an emergency, you have a short period in which you will pay the money, plus fees and interest, back. If you do not pay on time, additional interest and late fees can quickly become a huge financial burden.
Some payday loan companies will charge upwards of 200% or 300% in interest if you do not pay the money and fees back on time. Say you borrow $500 for two weeks, and there is a $75 fee for that money you must pay the $575 back at the end of the two-week. If you don’t have the extra $75, you face even higher fees, negative notices on your credit report, and dealings with collections.
Taking out a payday loan on social security can be a good option, but only when you've exhausted all other options. Ask friends or family for a loan, talk to SSA about an emergency (expedited) payment. If those turn out to be not possible, then look into payday loans with social security and compare rates and payment terms carefully.
What You Must Know About Your Payday Loan and Your SSI Benefits
Per the Social Security Administration, taking out a loan is perfectly acceptable, providing you spend all the money you borrow. If you fail to spend the entire amount, your monthly SSI limit is reduced by the amount you didn’t spend.
For example, if you take out a payday loan for $1,000 and only spend $800, your next month’s SSI benefit is reduced by the difference of $200. If you have a limit of $2,000, you’ll only receive $1,800.
Don't loan the excess to get out of this restriction. Loaning money to a friend or family member also counts against you. Don't borrow more than you need when taking out a payday loan with social security. If you do end up with extra money, spend it or, if possible, pay off a chunk of your loan early and prevent having your SSI benefits reduced.