Payday Loan Information and Facts
If you’re looking for a temporary solution to a financial emergency, a payday loan – also commonly referred to as a cash advance – is an ideal solution. By definition, a payday loan is a small, short-term loan (between $100 and $1,500), usually secured with a postdated check, that is intended to help a borrower with his cash flow before his next paycheck.
In the United States, payday loans are legal and regulated in 37 states – in one state in particular, issuance of payday loans is permitted only to licensed lenders. Payday loans are, however, prohibited in Georgia and 12 other states. Ohio also recently passed laws to curtail payday loan practices.
Where the payday loans are permitted, the APR (interest) charged and payment options are dependent on the laws of the state as some jurisdictions tend to impose strict usury limits. Typically, payday loans are easily accessible on the internet as well as in retail shops.
Only a few payday loan companies will do a credit check before lending to a customer. In most cases, bad credit will not stop you being granted a payday loan. However, how much you borrow will depend on your income. Additionally, lenders will usually require that you have been in the job for at least two months (sometimes more). And if you’re a first time customer, it is highly likely that they will want to verify your employment and income status to make sure that the income you declared is real.
How It Works
A borrower writes a personal check for the amount they need to borrow, plus a fee, payable to the lender. The lender will hold onto the check until the borrower’s next payday – usually up to a month later – only then will the check be deposited. In return, the borrower gets cash immediately, either in hand or transferred to their bank account, to spend whatever way they wish. The cash you receive is usually the amount of the check minus the fee.
Typically, payday loan fees are charged as a percentage of the face value of the check or as a fee charged per amount borrowed. In the event that you decide to extend or “roll-over” the loan, you will be asked to pay fees for the extension usually charged at the same rate as the original loan. A word of caution though…if you intend to get a payday loan, do ensure that you have the means to repay or you might find yourself in deeper debts than you previously were in. I will discuss in greater detail the pros and cons of payday loans in the next article here.
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