A payday loan is a short-term cash loan that is awarded based solely on the borrower's personal check, which is held for a future deposit or electronic access to the borrower's bank account. To get a payday loan, the borrower will write a check for the amount of the loan plus whatever fee is charged.
The borrower then receives cash in return for that personal check. Sometimes, borrowers sign over the right for the lender to electronically access their bank accounts in order to receive and repay the money for payday loans.
The lender will hold the check until the customer's next payday. At that date, the loan and finance charge must be paid in full. Borrowers can either allow the lender to deposit the check, redeem it for a cash payment, or pay the finance charge and roll the loan balance over to another pay period.
Payday Loan Terms
The size of a payday loan typically ranges from $100 to $1,000, depending on what is legal in the state. These loans are typically given for a two-week term. The average annual interest rate (APR) on these loans is 470%.
The charges on these loans are usually between $15 and $30 for a loan of $100. If the loan is a two-week loan, these finance charges equal interest rates from 390% to 680%. Loans with shorter terms have even larger APRs.
Requirements to Get a Payday Loan
There are few questions to answer and no credit check is involved when seeking a payday loan. All that is necessary for approval is an up-to-date bank account, a reliable source of income, and proper identification.
Payday Loan Industry
Payday loan stores, pawnshops, and check cashers are the types of companies that make payday loans. Some companies that offer rent-to-own products also offer payday loans. The Internet is another place where you can get a payday loan, and some are marketed through toll-free phone numbers.
CLR reported around 25,000 payday loan outlets in the United States in 2006. This resulted in at least $28 billion in annual loan volume, with loan fees paid by consumers totaling almost $5 billion.
Internet Payday Lending
Using the Internet for payday loans adds the risk of security breaches and fraud. Applications are filled in online or faxed to the lender when consumers apply for Internet payday loans. The money is directly deposited into the borrower's bank account through an electronic transfer.
They are also electronically withdrawn on the following payday. Many Internet payday loans renew automatically each payday, and the lender automatically withdraws the finance charge from the borrower's account with an electronic transfer.
Author Resource:-
Michael New Jr. is an authority in the financial industry. He has written hundreds of articles relating to consumer services and Payday Loans.
![[Valid RSS feed]](images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites
