Paydayloans FAQ's

What is a payday loan?

Payday loans are short-term cash advances for your emergency needs. They are usually taken when a person wants cash to meet an unexpected need, a medical emergency or for some special occasions. Payday loans are typically repaid within one to four weeks, and are given against your next paycheck. The amount of the loan varies from $100-$1,500. Payday loans are also known as paycheck advances, deferred presentments, cash advances or check loans. The loan is usually given in cash; however some lenders might give you a check or deposit the money directly into your account.

What do I need to get a payday loan?

Getting a payday loan is simple; you must be over 18 years of age and be in your job for at least 90 days. You need proof of regular income, a permanent address, and an active bank account. The lender will ask you to fill a loan application form and submit it along with an employment proof (usually a pay stub). You will also be asked to submit a post-dated check that will cover the amount of the loan as well as the finance fee (or loan interest). For example if you borrow $100 on the first of the month then you will give the lender a check for the 15th of that same month for an amount of $115. The difference between the amount of the check ($115) and the amount of cash the customer gets in return ($100) is interest or a loan fee that the lender is charging ($15 in our example).

What are the interest charges on the payday loan?

The interest charges and terms of conditions of the payday loans differ from state to state. In the United States, most states have usury laws (laws that govern how much interest can be charged on a loan), which forbid interest rates in excess of a certain annual percentage rate (APR). These laws also govern the loan amount, number of days of credit and also the number of times the loan can be extended. So if you live in Alabama and borrowed $100 for 14 days then you will have to $17.50 as fee (or 455 percent APR) but if you lived in Colorado then you will pay $20 as lender’s fee (or 520 percent APR). Typically the interest on the cash advances loans ranges between 390-900 percent.

How is the APR calculated?

Annual Percentage Rate (APR) is the equivalent interest rate after considering all the added cost to a given loan. It is a function of the loan amount, the interest rate, the total added cost, and the terms. The APR would equal the interest rate if there were no additional cost to a given loan. In a simplified example, if you borrow $100 for one year at 5% interest (so that you will owe $105 at the end of the year) and you pay the lender a $5 origination fee, your total cost to borrow the money will be $10 ($5 in a year for interest plus $5 now for the origination fee). Your APR will come out at just over 10%. The aim of using APR is to calculate a total cost of borrowing. APR is intended to make it easier to compare lenders and loan options. The APR is likely to differ from the "note rate" or "headline rate" advertised by the lender.

APR calcluator: http://www.efunda.com/formulae/finance/apr_calculator.cfm

Why does the APR differ for each lender?

Despite repeated attempts by regulators to establish a consistent standard for payday loans and cash advances, the APR does not represent the total cost of borrowing nor does it really create a comparable standard. Nevertheless, it is considered a reasonable starting point for a comparison of lenders. The difference in APR comes because not all costs or fees maybe added to calculate the total cost of a loan. Sometimes there may be added fees like a one time fee to the attorney or a penalty or late fee or some other service charges. Regulators have been unable to completely define which one-time fees must be included and which excluded. This leaves the lender with some discretion to determine which fees will be included (or not) in the calculation.

Where can I get a payday loan?

There are more than 20,000 payday loan stores in the US and you can find them by looking in your phone book. In addition, there are several hundred websites where you can apply for a payday loan online. There are some stores that even issue loans on the telephone. You can also find the nearest payday store in your city by going to the XXX page on our website.

How long does it take to get a payday loan?

It depends on how and where you take the loan from. Some online lenders say they can grant a loan in only 20 minutes, once you have furnished all the details. At most places, if your documents are in order, you should be able to secure a loan in less than a day.

What happens if I can’t repay the payday loan?

You can extend the term of the loan by paying the finance fee to the lender. Take the previous example where you borrowed $100 on the first of the month and had agreed to pay $115 after 14 days. If you are not able to repay the loan on the 14th, then the lender rolls over the check for two more weeks after collecting the finance fee of $15 from you. But remember, each time you extend the period the interest rate keeps increasing. For example, if you extend the period three times then you end up paying $ 60 as interest on a loan of $100.

How can I get an online payday loan?

There are several hundred websites that offer a payday loan online. Just search for the term payday loans on the Internet and you will see hundreds of websites offering these loans. (Go to page XXX on our website for a list of websites that offer payday loans) Typically, a consumer fills out an online application form or faxes a completed application that requests personal information, bank account numbers, Social Security Numbers and employer information. Borrowers fax copies of a check, a recent bank statement, and signed paperwork. The loan is direct deposited into the consumer's checking account and loan payment or the finance charge is electronically withdrawn on the borrower's next payday.
Is it safe to take an online payday loan?
Online payday loans are safe if you borrow from the right companies. Remember, you're going to be providing a ton of sensitive information. That information could be sold. Also, you're going to be providing your bank account to a company that could be outside the United States, and therefore outside the protection of US law. Check out every company you're thinking of using with the Better Business Bureau and your state’s Attorney General’s office and use a search engine to make sure there aren't any bad reports about them.
Are payday loans expensive?

Yes the interest rates charged on payday loans are higher than other loans like a mortgage. However they are sometimes the only source of credit for those who need cash immediately, have poor credit history and have no other ways of raising money. There is a lot of debate around this subject in the US; while some feel that payday loans lead people to a debt trap, others say that these companies serve a role in the society by lending to people in need.

In how many states in US are payday loans available?

Currently payday loans are legally available in 36 US states.

I don’t work can I still get a payday loan?

No, payday loans are only granted to people with employment or other income, such as social security or disability checks.

Will I get a loan agreement from the lender?

Yes the lender should give you a loan agreement, which you will have to sign. If you haven’t got an agreement, be sure to ask for it. In the agreement you will find terms and conditions pertaining to the loan. Please read the document carefully, it will contain the following information:

1 The amount of the loan and the date you must pay it back
2 Any upfront or first time fees and charges added to the amount of the loan
3 Various service fees and charges
4 The different repayment charges
5 Any fees and interest charges added to the amount of the loan when the loan is paid back on time
6 The consequences and any fees charged when the loan is not paid back on time

Does a payday loan affect your credit history?

Payday loans do not require a credit check. In fact for those people who have a poor credit history, payday loans are often the only source of borrowing. However if you do not pay back the loan on time, then it becomes difficult to get another loan since companies share information about defaulters.

What are your rights if you take a payday loan?

Payday lending is governed by the state. In every state you will find a Department of Financial Institutions (DFI) that grants license to payday lending companies. These companies are also expected to disclose full information about their finances to the department. Before borrowing you should contact the DFI in your state to make sure you are dealing with a licensed operator. For more information on state wise rules, see page XXX on our website.

What is the Truth in Lending Act?

Under the Truth in Lending Act, the cost of credit must be disclosed. Among other information, you must receive information outlining the finance charge and the annual percentage rate (APR). The APR informs you of the cost of your loan. For example, a 14-day, $500 payday loan with the maximum fee permitted by statute would have an APR of 391.07%.

Are there any alternatives to payday loans?

The FTC suggests the following options in place of payday loans:

Consider a small loan from your credit union or bank
Ask your employee for a pay advance
Ask your family or friends for a loan
Take a cash advance on your credit card
Plan and save some surplus cash for emergencies

Will I get into a debt trap if I take a payday loan?

Many critics of payday loans say that these loans lead people to a debt trap. Since most people live paycheck to paycheck, they are never able to pay back the loan on time. But these loans are expensive which means that people end up paying a lot more in fees and interest if the loan is not closed in time. For example a $100 loan, if not repaid for two months, could take away $60 in finance fees. That could lead a borrower to fall into a debt trap.

How do I avoid a debt trap?

If you want to avoid falling into a debt trap, then you must pay back the loan as soon as you get your paycheck. Payday loans can be helpful for one-time emergency costs such as medical fees but are not a good idea for funding unnecessary expenses. Be prepared for emergencies, ideally, you should keep enough money to cover your household expenses for two months in a savings account. If this is not possible, then aim to save at least the amount of one paycheck. Keep a few credit cards available for unexpected costs.

Avoid borrowing from more than one lender at a time
Compare prices, fees and other charges before you take a payday loan. Search for the cheapest payday loan
Contact the Department of Financial Institutions to verify that you are dealing with a licensed lender.
Know when your payment is due and be sure to repay the loan on time and in full.

Who Makes Payday Loans?

At the beginning of the 1990s, it was the small check cashing outlets and pawnshops that offered payday loans and check advances. In the last 15 years the number of companies that offer these short denomination loans has grown manifolds. Now there are a number of large online companies offering payday loans and cash advances. Industry analysts estimate that the number of payday loan offices nationwide increased from less than 500 in the early 1990's to approximately 22,000 in 2005, with continued growth expected. For a complete list of payday loan stores in your city click on the link XXX on this website.

Important Disclosure: A payday loan is not intended to meet long-term financial needs. You should use a payday loan only in a financial emergency. You have to pay additional interest if the original loan is refinanced rather than paid in full when due. Refinancing a payday loan or entering into consecutive payday loans to pay an existing payday loan may cause financial hardship for you. Contact the Department of Financial Institutions to verify that you are dealing with a licensed lender.

Top 10 Payday Loan websites: click here for the Top 10 Payday Loan sites