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.