Payday Loans
Payday loans – short term help
Payday Loan
"I just need enough cash to tide me over until
payday." Sounds familiar to you? I'm betting it
does. We constantly find ads to this effect on
the radio, television, the Internet, and even in
the mail. The type of loan being referred to, of
course, is payday loans. And they come at a very
high price, too, by the way.
Payday loans have become a way for people to get
fast cash. Check cashers, finance companies and
others are making small, short-term, high-rate
payday loans that go by a variety of names.
Sometimes, they're called cash advance loans,
check advance loans, post-dated check loans or
deferred deposit check loans.
But how do payday loans work? Well, usually, a
borrower writes a personal check payable to the
lender for the amount he or she wishes to borrow
plus a fee. Afterwards, the company or the
lending institution would then give the borrower
the amount of money in the check minus the fee.
The fees charged for payday loans are usually a
percentage of the face value of the check.
Sometimes, the fee may be charged per amount
borrowed. For instance, for every $100 loan you
borrow, you get charged a fee of $50. If the
loan is extended, a process referred to as
"roll-over", you are obliged to pay the
additional fees that could incur. So for
example, you make an extension of two weeks for
your $100 loan. That means, you pay a total of
$150 in fees, provided that one week equals to a
$50 fee.
The Paperwork
Under the Truth in Lending Act, the cost of
payday loans, like other types of credit, must
be disclosed to the borrower. Other pieces of
relevant information that you must receive in
writing include the finance charge or the dollar
amount and the annual percentage rate or APR.
The APR refers to the cost of credit on a yearly
basis.
Fast Cash, High Rates
A payday loan, which is a cash advance loan
secured by a personal check, is a very
expensive source of credit. But despite
this, many people still opt for payday
loans. To explain to you just how expensive
payday loans can be, let's say that you need
to borrow $100 and so you write a check for
$115 which would pay your loan for up to 14
days. The check casher or payday lender
agrees to hold the check until your next
payday. At that time, depending on the
particular plan, the lender deposits the
check. You then redeem the check by paying
the $115 in cash. If you can't make the
payment, you can also roll-over the check by
paying a fee to extend the loan for another
two weeks. In this example, the lender
charges you $15 as fee and at the same time,
the loan costs you 391 percent APR. If you
roll-over the loan three times, the finance
charge would climb to $60 to borrow $100.
This article is the property of
www.1st-in-homeloans.com, which has been
offering home mortgage services since 2002. To
find out more visit
www.1st-in-homeloans.com
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