Temporary Financial Relief from Paycheck Loans

2007-03-08 10:33:40

( Financial )



Paycheck loans, also known as deferred deposit advances which one can obtain on a short-term basis. The loans are granted on the premise that the borrowed amount is repaid to the lender on the borrower’s next payday, or when they receive their next regular income check.

The release of the loan is normally in the form of cash; upon the release of the loan amount, the borrower should provide lender with a postdated check or an authorization to debit the borrower’s bank account based on the amount borrowed and the service fee charged for providing the loan.

In certain situations, some financing companies agree to defer a borrower’s repayment to a further two weeks under some conditions.

When the loan matures, the lender expects to be repaid. If for some reason the borrower is unable to pay the loan, despite the issuance of a postdated check or debit authorization, paying an additional fee can restructure the loan. If the borrower’s account has insufficient funds to pay, the financing company or lender charges the borrower the penalty fee for the return of the check or debit authorization and collection fees on the loan.

Paycheck loans or paycheck advances can also be obtained from banks that offer a direct deposit advance service for their clients. If one’s paycheck is deposited electronically on a regular basis, the bank may release a certain amount to the depositor. The borrowed funds along with a service fee, are deducted from the depositor’s next direct deposit payment.

The consumer must be careful when obtaining paycheck advances. Although this could be a quick solution for someone in dire need of funds, one can end up paying the equivalent of several times the actual amount borrowed because of the high interest rates charged. The consumer must ensure that when obtaining paycheck loans, the amount borrowed is paid back at the earliest possible time in cash.


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