Payday loans are short-term cash loans based on the borrower's personal check held for future deposit or electronic access to the borrower's bank account. Borrowers write a personal check for the amount borrowed plus the finance charge and receive cash. In some cases, borrowers sign over electronic access to their bank accounts to receive and repay payday loans.
Lenders hold the checks until the next payday when loans and the finance charge must be paid in one lump sum. To pay a loan, borrowers can redeem the check for cash, allow the check to be deposited at the bank, or just pay the finance charge to roll the loan over for another pay period.
They are also sometimes referred to as cash advances, though that term can also refer to cash provided against a prearranged line of credit such as a credit card.
Check cashers, finance companies and others are making small, short-term, high-rate loans that go by a variety of names: payday loans, cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans. Usually, a borrower writes a personal check payable to the lender for the amount he or she wishes to borrow plus a fee. The company gives the borrower the amount of the check minus the fee. Fees charged for payday loans are usually a percentage of the face value of the check or a fee charged per amount borrowed - say, for every $50 or $100 loaned. And, if you extend or "roll-over" the loan - say for another two weeks - you will pay the fees for each extension.
Compare the APR and the finance charge (which includes loan fees, interest and other types of credit costs) of credit offers to get the lowest cost. Borrow only as much as you can afford to pay with your next paycheck and still have enough to make it to the next payday.
"Thanks Academy! We recently refinanced our home with an 'A' credit rating. Your service will save us thousands of dollars in interest on our home loan. I am telling everyone I know about your service. Sincerely,"
Play >
