Payday Loans

Payday loans are a short-term loan for $100 to $1,000. It is sometimes called a payday loan because you take the loan with the promise to repay the cash from your next paycheck.

• For example, on March 1st you needed $500 cash but your payday is in two weeks. The payday loans lender agrees to give you the loan with a $60 service fee. You then write a post-dated check for March 14th for $260. The lender will then give you $200. The lender will hold your post-dated check.

• To repay your payday loans you will redeem your post-dated check with cash, money order, or let the loan company deposit the check to your bank. Another option is to rollover the payday loans. This means that the loan can be repaid at still a later date. An additional fee is added onto the first payday loan making your loan total $320 ($260 + $60). The loan can be rolled over two, three, or more times, before coming due. Each time the payday loans is rolled over, you will be charged an additional fee. As a result, this type of loan can be very high priced credit.

Many check cashing businesses offer small sum, short-term, high-rate, unsecured personal fast payday loans. These loans go by many names, including "payday loans," "cash advance loans," "post-dated check loans" or "deferred deposits."

In a payday loans transaction, the lender will provide to the lender items such as a paycheck stub, photo identification and a recent bank statement. The borrower writes a check to the lender for the amount of the payday loan and the lender's fee. Under law, the lender's fee cannot exceed 15 percent of the payday loans amount and the total face value of the check may not be more than $500. The lender agrees to hold the check until the customer's next payday, up to 30 days. At that time, the borrower may redeem the check with cash, allow the lender to deposit the check or roll over the payday loans by paying another fee.

Fast Payday Loans Online

We have all seen the advertisements for them. I’m talking about payday loans. They claim to offer an easy way out of debt. One company even says payday loans are “your cash solution”. These finance companies make it seem like free money. Payday loans are also called high-risk loans, loan sharking or cash advance loans. Payday loans actually are short-term loans with very high interest and in most states are perfectly legal.

Payday loans appeal to younger consumers, people with limited understanding of finances and those who are deep in debt. According to the FTC, payday loans lenders usually look for people who are high in debt or have a history of using high-risk lenders.

In recent years a number of payday loans lenders have extended their risk selection standards to attract subprime loans. Among the various types of subprime loans, payday loans are now offered by an increasing number of insured depository institutions.

Payday loans are small-dollar, short-term, unsecured loans that borrowers promise to repay out of their next paycheck or regular income payment (such as a social security check). Payday loans are usually priced at a fixed dollar fee, which represents the finance charge to the borrower. Because these loans have such short terms to maturity, the cost of borrowing, expressed as an annual percentage rate (APR), is very high for payday loans.

In return for the loan, the borrower usually provides the lender with a check or debit authorization for the amount of the payday loan plus the fee. The check is either post-dated to the borrower's next payday or the lender agrees to defer presenting the check for payment until a future date, usually two weeks or less. When the payday loans is due, the lender expects to collect the loan by depositing the check or debiting the borrower's account or by having the borrower redeem the check with a cash payment. If the borrower informs the lender that he or she does not have the funds to repay the payday loans, the loan is often refinanced through payment of an additional fee. If the borrower does not redeem the check in cash and the payday loans is not refinanced, the lender normally puts the check or debit authorization through the payment system. If the borrower's deposit account has insufficient funds, the borrower typically incurs a NSF charge on this account. If the check or the debit is returned to the lender unpaid, the lender also may impose a returned item fee plus collection charges on the payday loans.

Payday loans may sound like a good source of quick and easy cash. But the truth is these types of payday loans may push you further into debt. Ask yourself these questions:

• What are the total fees, the payback plan, and the penalties if you don't pay the quick payday loan back on time?
• Why do you need quick cash for emergencies?
• How can you get a loan that is less costly? Can you borrow from friends or relatives?
• Do you need to talk with a financial counselor to solve your money problems?
• How can you save $300 in quick cash in a savings account that would be for emergencies?
• Can you delay paying a non-interest-charging bill such as utility bill and make payment arrangements with them instead?
• If you decide to borrow money from a payday loans lender, make certain to borrow only what you can afford to pay back from your next paycheck.

Here is a typical example of how payday loans works: the borrower requests a loan for a short period of time, usually one to four weeks. They provide the lender with proof of employment and identification. In exchange for the payday loans, they leave a postdated check with the lender that includes the “payday loan fee”. The cost might seem low; maybe the borrower paid $115 to borrow $100 for two weeks. While this may not seem like much, if you calculate the loan cost in terms of APR (annual percentage rate) that $15 explodes to 360 percent interest.

If the payday loans borrower continues to have financial problems and cannot payback the loan as promised, the interest keeps building and so does the debt.

The Federal Trade Commission’s recommendation is to avoid payday loans. Here are some safer options for short-term payday loans:

Try a small loan from a credit union.
Ask for a pay advance from your employer.
Consider a loan from family or friends (be sure to have the terms of the loan in writing).
Use a credit card advance.
Request additional time to pay the bill from your creditors.
Becoming aware of your options before you need a short-term loan is important. Remember that spending more than you make is always a trap, and payday loans are an expensive solution to a money management problem.

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