Payday Loans: An easy explanation

Payday Loans: An easy explanationMost of us will be familiar with this term; the Payday Loans. It is also known as the Payday advance for some people, cash advance for others, or maybe a salary loan. When we talk about this term, we are usually referring to one specific kind of loan that owns the following characteristics: it is usually a short term loan, that’s usually made for less than 500$, and one of the terms of this agreement is to be subdued on the person’s next payday.

To prevent the excessive rates of interest, many jurisdictions made movements to control a limit the percentage rates that the lenders can charge to the clients. Even so, there are many places where this activity is completely outlaw, having only a few restrictions on the lenders of the payday loan. In the American territory, this kind of loan used to be equally restricted by the Uniform Small Loan Laws, allowing only an amount of interest between 36% and 40%.

This kind of loan usually represent a certain amount of risk for both the lender and the borrower, but studies have shown that this kind of economic activities do not represent any more risk especially higher  than any other kind of credit transaction do. For one side (the borrower) the risky part lies mostly in the rates of interest, and how will he or she pay for them as the time passes and the amount of the debt increases. In some states of the united states you might not even be able to find a store or a lender willing to make a payday loan because that kind of loan is not permitted by the laws of that specific jurisdiction.

Payday Loans are usually paid off in one payment, but the interest-only payments are not unusual in this context. Sometimes, and according to the loan terms (and amount), the payments can be structured to be paid in quotes over a long period of time. There are many different ways of payment that can be agreed between the lender and the borrower that can vary from the most simple way, such as providing the cash directly   to the lender, or loading the money into a prepaid debit card, or even making use of the internet to make an electronic deposit into the lender’s checking account.

Cost and Process
The costs of this kind of loan might vary between the ranges from $10 to a maximum of $30 for every $100 that the lender gives to the borrower. The basic process involved in the payday loans is, in a few words, lending a shot-term loan to be repaid at the borrower’s next payday. To bring a little more of security to the lender, a employment verification, or income certificate is involved in the transaction. Every individual company or franchise has its own criteria for the terms.

Usually the borrower will go to a payday lending store and get a small cash loan, making secure that it will be repaid with the borrorwer’s next paycheck

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