What do Payday Loan Companies Do?

A payday loan, which is also referred to as a “check loan” or “cash advance,” is a type of short-term loan that is typically given in amounts less than $500. It is expected that you pay the entire amount of the loan, plus any interest and fees, by your next payday.

There are three general features that you will find with most payday loans, which include:

  • The loans are for a small amount of money.
  • The loans are typically due by your next scheduled payday.
  • You have to give the lender access to your bank account information or provide a check, written for the entire balance up front so that the lender can deposit the check when the loan is due.

The other features of the loan can vary slightly. For example, a payday loan can be structured so it is paid off in a single lump sum payment and the interest only payments – such as rollovers or renewals – are fairly common. In a number of cases and depending on the payday loan service you use, you may be able to create an installment plan, over an extended period of time, to repay your payday loan.

Some of the ways that the lender will provide you with the cash you are borrowing includes:

  • Giving you a check or the cash.
  • Putting the total amount of the loan on a prepaid credit or debit card.
  • Electronically depositing the money into your actual checking account.

The actual cost of the loan, or the finance charge, can range from $10 up to $30 for every $100 that you ask to borrow. For example, if you take the typical two week payday loan that carries a $20 fee for every $100 this will be an annual percentage of over 400 percent. If you compare this to the APR on a credit card, it only ranges from 12 percent to 30 percent.

There are state laws, as well as a number of other factors that will influence the amount that you will be able to borrow, as well as the fees that you will be charged. There are some states that do not offer any type of payday lending retail location since the loans are not allowed due to the law within that particular state, or because lenders may not choose to operate their business in a certain state due to the stringent regulations.

If you want to learn more about payday loans and how they may benefit you, visit Payday Loan Reviews today.