Cash Advance Payday Loans

If you haven't been living under a rock for the last year then you have heard about "payday loans". Generally, these are short-term, high-rate loans also called cash advance payday loans, check advance loans, post-dated check loans or deferred deposit check loans.

This is how it works: a person writes out a personal check payable to the lending company for the amount they'd like to borrow, plus the fee. The lender gives the borrower a cash advance, the amount of the check less the fee. Fees that are charged for this type of loan are normally a percentage of the face value of the check. If the borrower extends or "rolls-over" the loan - for example another three weeks - you will pay the fees for each of these extensions.

Finance companies, check cashers, and others are bound by the Truth in Lending Act, which requires the full cost of payday loans - and any other type of credit - to be disclosed. It also requires you to receive, in writing, the finance charge and the annual percentage rate amongst other things.

Of course this can be a quick way to put cash in your pocket, but if not handled wisely it can be very expensive credit. Say you want to borrow $100 for up to two weeks so you write a check for $100 + $15 to cover the fee. The payday lender holds the check until your next payday. If you decide to extend the loan for another two weeks you've paid $30 to borrow $100. This may still be reasonable depending on your particular situation, but extend another two weeks and suddenly you've got a lot of extra debt piling up. Pay off the loan in a timely manner and avoid the pitfalls.