payday loansPayday Loans, also known as cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans allow you to immediately borrow up to $1,000. Companies advertise direct deposits to your account within a matter of hours.

All that is generally required to get a payday loan is proof of employment – such as a pay stub, a checking account and a post-dated check for the amount you want plus the fees.

The repayment term of these loans is very short — 45 days maximum. These loans may be very expensive if the term is extended. On its face a payday loan is a very simple process. It is a much easier to get than a bank loan, as there is no credit check and no collateral required. The loan company, however, does have access to your bank account.

You write a personal check for the amount you would like to borrow, plus a lender’s fee based on this amount. The lender will pay you the amount you would like to borrow and hold on to your check until the arranged payment date. In case the customer does not reclaim the check by repaying the loan and fees, then the lender cashes the check for the payment.

At present, payday loans are regulated by 33 states. Due to an overwhelming demand by consumers, the number of these types of lenders has risen from 17 in 1995 to more than 300 today. There are lots of payday lenders out there.

This type of loan is often a primary source of borrowing for people with bad or damaged credit – a place for emergency cash for people who cannot qualify for a bank loan.

Payday loans can be very costly — they are known as emergency loans for a reason. The most common rate is $25 per $100, which is an APR of 650% annually. Some website lenders charge considerably more, with interest rates in the thousand percent range or more. I’s possible with a little diligence to find lower rates, even as low as $10 per $100.

Be fully aware of your payday loan agreement. Since the company has your bank account information, it has the discretion to take out fees and costs associated with extending the loan. If you don’t follow the instructions exactly, the loan company may end up extending the loan even if you are able to pay on time, simply because you did not inform the company far enough in advance that you are going to pay off the loan in full.

Though no legal definition exists for predatory lending, it usually refers to tactics used by lenders to convince borrowers to agree to unfavorable (read “expensive”) loan terms or to deceive the borrower in some way for profit. Examples of predatory lending include lying about the terms of a loan included on documents a borrower must sign and targeting specific groups of people with expensive loans. Payday loans, some credit cards, some subprime mortgages, and abusive overdraft loans have all been used as examples of predatory lending.

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