Payday Loans

A cash payday loan is a term used to describe a short-term cash loan intended to tide the borrower over for two weeks until her or she next gets paid. Such loans are not available from banks, which tend to offer only long-term loans for amounts in excess of $1000. A cash payday loan is usually issued for a smaller amount of money, most often an amount in the $100-$500 range, though they can sometimes be for as much as $1500. The amount someone may borrow is subject to the laws of the state in which the lender resides.

A cash payday loan may be acquired in person in a brick and mortar store or online from a lending Website. The process for borrowing the money is essentially the same for both types of lenders. A customer who needs a short-term term loan goes to the store and provides the lender with the following:

Most payday loan companies do not check with the credit bureaus to see if the borrower has a good credit score or a favorable history of repaying loans or paying bills. Online lenders generally require that the documentation be submitted by facsimile machine, though some lenders advertise themselves as faxless payday loan lenders; such lenders simply require borrowers to fill out a form online.

In the case of a loan from a store, the lender simply gives the borrower the cash on the spot. In two weeks' time, the borrower is expected to return and repay the loan in person. In the event that he or she does not, the lender may cash the postdated check. In the case of online loans, the lender electronically withdraws the money from the borrower's account.

What happens in the event of non-payment varies by state. In most of the states that permit cash payday loans, the loan may be rolled over or reissued for another two weeks. The borrower pays the fee a second time and is expected to repay two weeks later. A few states do not permit borrowers to roll over their loans; these states usually give borrowers a certain amount of time to repay without additional charges or interest.

Interest rates on both store and online cash payday loans tend to be rather high when compared with bank loans. While there is no interest charge per se, there are fees associated with the loans in amounts that average $15 per $100 borrowed. When viewed as an annual percentage rate, these fees equate to a rate of some 390% per year. Because of these high rates, some thirteen states prohibit payday loan stores, though these states have a difficult time controlling their citizens' ability to borrow from online lenders.

Cash payday loans may be useful for occasional cash emergencies, but due to their high cost, they are not suitable for people who have long-term or ongoing cash problems. Such people would be best served by borrowing money from a bank or credit union.

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