Payday loans can provide Missouri residents with quick access to cash during financial emergencies. However, these short-term, high-interest loans also come with risks that borrowers should fully understand. This comprehensive guide covers everything you need to know about payday loans in Missouri, including eligibility requirements, costs, alternatives, and tips for responsible borrowing.

What Are Payday Loans?

Payday loans are a type of short-term financing that allow consumers to borrow a small amount of money, usually $500 or less in Missouri, that is expected to be repaid upon receiving their next paycheck. These loans, sometimes called cash advances or check loans, act as an advance on the borrower’s future paycheck.

Payday lenders provide quick access to cash without requiring a credit check or collateral. The streamlined application process and fast funding makes payday loans appealing for those needing immediate funds in an emergency between pay cycles. Lenders can approve loans in minutes and deposit the money directly into bank accounts the same day if requested early enough.

Payday Loan Requirements in Missouri

To qualify for a payday loan in Missouri, applicants typically must:

  • Be 18 years or older
  • Have a regular source of income
  • Have an open checking account in their name
  • Provide valid photo ID
  • Provide proof of income such as recent pay stubs

As long as you meet the basic requirements, approval is fairly easy and given quickly. Lenders may request access to your bank account to automatically withdraw the repayment amount when due. Having bad credit or a history of bankruptcy does not necessarily disqualify you from being approved.

The eligibility criteria makes payday loans more accessible for those who may not qualify for other financing options like personal installment loans or credit cards. The quick approval decisions and fast access to cash make them appealing when you need money right away.

Payday Loan Terms in Missouri

Missouri regulates payday lending terms and caps fees to provide certain consumer protections. Understanding the loan terms is important.

Loan amounts: Payday loans are limited to $500 or less in Missouri. Some states allow higher amounts.

Loan term: Payday loans must be structured to last between 14-31 days. The term aligns with the borrower’s next pay date when repayment is due.

Costs and fees: Lenders cannot charge interest and fees exceeding 75% of the original loan amount on an annual percentage rate (APR) basis. For a $100 loan repaid in 14 days, this equates to a fee of $17.50.

Repayment: The full loan amount plus any fees and interest must be repaid in one lump sum by the due date, usually the borrower’s next payday. This repayment structure helps explain why payday loans are meant for short-term use.

Payday Loan Benefits

When used responsibly, payday loans can provide benefits:

  • Quick access to cash – Borrowers can receive funds the same day they apply either electronically or in cash at a storefront. This rapid financing helps cover emergency costs that arise before your next paycheck.
  • Easy to qualify – Approval decisions are fast and requirements are minimal. Payday loans are more accessible to those with lower income or poor credit.
  • Avoid costlier options – Payday loan fees, while still expensive, may be lower than paying late fees, overdraft penalties, utility reconnection fees, or other consequences of missing a payment due to lack of funds.
  • Convenient applications – The application process is simple. Many lenders allow online applications 24/7 and some provide loan decisions in minutes.
  • No credit check – Payday lenders generally do not check your credit score or report, so bad credit is usually not a barrier to approval. This allows more consumers to qualify.

For the right borrower facing a temporary cash crunch or unforeseen expense between paychecks, a payday loan can provide needed relief. However, consumers must also weigh the downsides and risks.

Payday Loan Risks and Drawbacks

While handy in emergencies, payday loans have costly fees and structures that can trap borrowers in cycles of debt. Consider the downsides before getting one:

  • High interest rates – Interest charges of $15-$20 per $100 borrowed is common. This equates to astronomical triple digit APRs of 400% or more. Rates this high make it difficult to repay without reborrowing.
  • Short repayment terms – Having only 14-31 days to repay in full creates cash flow challenges. Many borrowers lack the lump sum due, forcing them to renew or roll over the loan into a new one.
  • Rollover fees accumulate – Every time a payday loan is rolled over into a new loan, a new fee can be charged. This leads to mounting interest fees over months.
  • Risk of overdraft fees – If the repayment debit from your account overdraws your available balance, you can incur hefty overdraft charges from your bank too.
  • Can hurt credit – Failure to repay per the loan terms can result in collection actions being reported to the credit bureaus, damaging your credit scores.
  • Alternative options – More affordable lending options likely exist such as credit cards, payment plans with creditors, or borrowing from friends/family.

Consumers must weigh the convenience and instant cash access against the potential to get caught in an expensive debt cycle that is difficult to escape. Payday loans should be used as an absolute last resort.

Payday Loan Alternatives

Prior to considering a payday loan, exhaust all other less-expensive funding options:

  • Ask for an advance or overtime hours from your employer
  • Request bill extensions or make alternate payment arrangements
  • Apply for assistance programs or local non-profit agency help
  • Borrow from a friend or family member
  • Use a credit card or tap available credit lines
  • Take out a lower-interest personal installment loan from a bank/credit union
  • Draw from your emergency savings fund if available

Building emergency savings over time and maintaining good credit to qualify for lower interest rate borrowing options are the best ways to avoid needing payday loans. But when a financial crisis arises before payday, a payday loan may be your only recourse.

Tips for Responsible Payday Loan Borrowing

If you need fast cash and decide a payday loan is your only viable option, follow these tips to be a responsible borrower:

  • Borrow only what you need – Don’t take the maximum loan amount offered if you don’t need it. Interest is charged on the borrowed amount.
  • Understand the full costs – Review the loan agreement carefully so you know the total fees and are confident you can repay it in full when due.
  • Avoid rollovers – Do not extend the loan. Have a plan to cover repayment from your next paycheck without the need to reborrow. Extensions only add substantial cost through new fees.
  • Check account balances – Before loan repayment, confirm your bank account has sufficient funds to cover the debit. Partial payments can still result in fees.
  • Build savings – Develop a habit of saving to create a cash buffer for emergencies that helps avoid the need for future payday loans.
  • Improve credit – Maintaining good credit increases your chances of qualifying for lower cost financing options like credit cards and traditional bank loans.
  • Use sparingly – Only use payday loans as a very last resort given the high costs. First exhaust safer borrowing options and cutting unnecessary expenses.

Payday Loan FAQs

Can you have more than one payday loan?

It is possible to take out multiple loans, but not advisable given the fees and repayment challenges. Avoid borrowing from multiple lenders at once.

How many payday loans can you get in Missouri?

Missouri does not cap the number of payday loans residents can have, but the total outstanding balances across lenders cannot exceed $500 at any time.

Do payday loans affect your credit?

Payday lenders generally do not perform credit checks or report loans to bureaus. But if you fail to repay on time, collection actions could be reported and hurt your credit.

Can payday loans garnish your wages?

If a loan defaults, the payday lender could potentially sue you and seek wage garnishment ordered by the court to satisfy the debt. Wage garnishments are a last resort after all collection efforts fail.

Where can I report payday loan scams?

If you believe a payday lender has engaged in fraudulent, deceptive, or illegal practices, file a complaint with the Missouri Division of Finance online or by calling 573-751-3415.

Conclusion

Payday loans offer fast cash but carry risks that consumers should weigh carefully. Consider all your options and only use payday loans as an absolute last choice. Have a realistic repayment plan, borrow conservatively, and take steps to avoid needing them in the future through budgeting and building savings and credit. With prudent use, payday loans can provide temporary relief but are best avoided entirely when possible due to the high costs.

Key Takeaw1. Payday loans provide fast access to cash – Funds can be deposited the same day you apply either electronically or received in person at a store. This makes them handy for covering emergency expenses that pop up before payday.

2. Loans are due in full on your next pay date – The entire loan amount plus fees must be repaid in a single lump sum, usually within 14-31 days. This short repayment period creates risk of falling behind and taking out new loans.

3. Rollovers and extensions add substantial costs – If you extend or roll over the loan rather than repaying it in full, new fees are added which leads to mounting interest expenses over time.

4. Consider lower-cost alternatives first – Exhaust options like borrowing from friends/family, using credit cards, or seeking assistance before resorting to costly payday loans. These alternatives can help you avoid debt traps.

5. Use payday loans as a last resort only – Given the high fees and risks, only use these loans if you have no other emergency funding options available before your next paycheck. Have a plan to pay it off in full when due.

Samuel Mitchell