What is a Payday Loan?
If you’ve come upon this site, you’ve probably got some basic questions about how payday loans work, what they are, and whether they’re a good fit for your situation. While we can’t advise you on your situation, we can provide you with some good information about how these loans work so you can make the best decision for yourself. Our goal is to help educate consumers so they can make informed, not irrational decisions about these loans. So with that said, let’s get started! Payday loans Pennsylvania can also be called cash advances, payroll advances, deferred deposit loans, payday advances, and paycheck advances. They are short term loans (usually used in case of an emergency) that are typically due by the time you get your next paycheck. The lender charges a fee plus interest, and loans you money until your next payday.
Major Types of Payday Loans Available:
There are a number of variations or types of pay day loans. The difference is primarily in the way in which the borrower interacts with the lender.
Storefront Payday Loans:
The most common type of payday loan is also the original form, transactions that take place in a store location. Store locations may require that you provide a physical check as security for the loan. This check is held until the borrower pays off the loan at the end of the agreement. The borrower is expected to come to the location to pay the lender, but if they do not the check is used to collect from the borrower. If there are insufficient funds in the account, the borrower will still have to pay the debt to the payday loan lender, as well as a possible bounced check fee to the bank.
Online Payday Loans:
A fast growing alternative to traditional pay day loans are online pay day loans. Again, the substance of these loans differs little from the traditional form. The most significant difference, is that these payday loans can be completed completely online. In addition, online payday loan companies take an Automated Clearing House (ACH) authorization to secure the loan. This is the same process employers use to directly deposit paychecks. To learn more about this particular type of loan, visit our online payday loans page.
Other Types of Loans/Lenders:
Payday loans are delivered in a variety of other formats, some of which are: ‘no fax’ pay day loans, telephone pay day loans, and bank offered payday loans. Again, the primary difference between these and any other payday loan has less to do with differences in the nature of the loan and more to do with differences in the way that the borrower interacts with the lender.
Basic Facts About PayDay/Cash Advances:
To qualify for a payday loan, the borrower needs to have a valid photo identification and proof of income. Lenders usually won’t require a full credit check because most people asking for a payday loan are usually in a financial crisis. Due to the great risk this puts on the lender, interest rates assigned to payday loans are usually very high.
To prevent these interest rates from getting too high, some states limit the annual percentage rate (APR) that any lender can charge. Some states don’t allow payday loans at all, while others have very few restrictions for payday loans.
Financial experts don’t recommend using payday loans because the APR can be up to 500%. While this type of loan may be an easy source of cash in an emergency, it can also be very expensive. Payday loans that roll over three or more times can gather enough interest to equal or be greater than the amount of the original loan.
Payday loans are very risky for lenders and borrowers. According to a study, payday lenders lose about a quarter of their annual revenue because of defaults by borrowers. Borrowers are also at risk because payday loans are merely a quick fix to a much bigger problem. If the borrower is already in a financial crisis, a payday loan could bring them further into debt.
If you find yourself in financial trouble, don’t think that payday loans are the only way to get out. If they are used to often, or if they are not used wisely, the resulting debt could leave you in a bigger financial mess than before. Consider all of your alternatives, and make sure you will be able to pay off all of your debts when they are due. If not, the money you work so hard to earn will have to go toward paying off debt, and your credit rating may take a turn for the worse as well.