Short Term Payday Loans

2007-04-17 10:41:55

( Financial )



A payday loan is a type of short loan specifically created to address the financial needs of employees who find themselves falling short on cash in between paydays. Availing of a short term payday loan allows you to borrow a limited amount of money for up to a couple of weeks, which is when your next salary is expected to arrive. Short term payday loans are usually given in cash; hence the alternative name of cash advance.

Both small and large financial institutions offer short term payday loans. Banks typically offer a variation of the payday loan known as direct deposit advance. Payday lenders are required to have a state license to be able to operate their business.

Some payday lenders require you to prove that you have a stable source of income, to ensure that you will be able to repay the loan. When borrowing, you will have to secure your payday loan with a postdated check, which the lender will process on the maturity date. The postdated check contains the principal amount you borrowed plus the additional interest.

In case you are not able to pay the loan at the specified time, you can pay a fee that will give you an extension for another couple of weeks. This process is called a rollover. Some states do not allow rollovers while others impose limits on the number of rollovers that can be made on a payday loan.

The high interest rates associated with short term payday loans have been the subject of controversy. Some sectors believe that payday loans unfairly target low-income earners. Because of these, certain areas have established regulations regarding the use of payday loans, while some states have banned it entirely. However, payday loan proponents have argued about the advantages of the payday loan. Short term payday loans have been shown to be beneficial alternative for employees, especially when dealing with cash emergencies.


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