What Are Payday Loans? Mahidi

                  LET'S KNOW ABOUT PAY-DAY LOANS

 Payday loans are also called money advances, and are relatively small (usually not for amounts exceeding $1,500), short-term loans that do not require credit checks.  They are on hand to borrowers who are a little short on cash and are looking to bridge the gap between pay days.  They are in particular attractive to people who have immediate cash needs due to certain emergency situations, such as a car repair or necessary prescription.

Cash is specified to the borrower, who gives the lender a post-dated check for the loan major plus a loan fee, along with any accrue interest.  The maturity date on the loan will classically be the borrower’s next pay day, which is when the lender will process the check.

Payday loan lenders are normally set up in small shops or franchises, but can also be found at large financial institution who will offer variation of payday loans.

If a borrower takes out a payday loan for $100, they will write a post-dated not public check for $115, which includes the principal balance and the loan fee.  The borrower will receive $100 in cash.  The lender will hold this check for up to two weeks, at which time the borrower will be given the selection to either redeem the initial check for $115 in cash or to roll-over or refinance the check by paying a fee that will extend the loan for another two weeks.  If the borrower does not roll-over the loan, the lender will deposit the $115 check.  If the borrower refinances the loan three more times, they will have to pay an additional $15 for each roll-over, or in other words, they will be paying $60 to borrow $100.

Payday loans are a sore subject for some, and have become a foundation of controversy.  critic say that these loans are targeted at people who do not appreciate the concept of the time price of money, and say that payday lenders are no different to loan sharks since the interest rates are extremely high.  In most cases, the APR on these loans will exceed 250%.  In the example above, the $15 fee is alike to a 391% APR.

Though payday loans are a convenient source of instantaneous cash for short-term needs, it goes devoid of saying that potential borrowers should beware of making continuous roll-overs, and that the APRs they pay may be quite a bit superior than APRs they might be able to find on a widespread credit card.