Payday loan is often featured in some advertisements these days, and most of the check cashers, finance companies, and others are making this small, short term and high rate loan that go with various names, such as payday loan, cash advance loan, post-dated check loan, check advance loan, deferred deposit loan, or high-risk loan.
A payday loan is just pretty simple to comprehend. Basically, a payday loan is small, unsecured, short term cash advance loan grants you to meet your financial needs until your nest payday. Being short term, small and unsecured, a payday loan is just applicable for those short term cash management as well as those loans that are not intended for larger financial dilemmas that most of the consumer credit counseling would usually resolve.
Essentially, in a case of borrowing a payday loan, a borrower typically writes a personal check that is owed to the lender for the amount he or she wishes to borrow along with a fee. In this case, the lender usually provides the borrower the amount of money or minus the fee. And, speaking of fees, the fees charged for a payday loan is typically a percentage of the face value of the check itself or sometimes a fee charged per amount borrowed. For example, for every $50 or $100 loaned. There are also some cases in borrowing a payday loan that when you extend or "roll-over" the loan, say, for another two weeks, you are required to pay the fees for every extension placed.
It is given that under the Truth in Lending Act, the cost of the payday loan, just like the other forms of credit, is required to be disclosed. So among the added information that the borrower should obtain particularly in writing are the finance charge as well as the annual percentage rate or the APR, which is usually considered as the cost of credit on an annual basis.
Given such facts, a payday loan may not be right for everyone. For that, it is interesting to know that there are some alternatives to payday loans. It is just necessary that you consider the possibilities before choosing or deciding on a payday loan. One of the major recommendations for this is when you need credit, shop first carefully and compare the offers. It is necessary that you look for the credit offer with the lowest APR or you may consider a small loan from your credit union or small loan company. Aside from this, a particular cash advance on a credit card may also be beneficial, however, just understand that it may have a higher rate than your other sources of fund. So, as much as possible, figure out the terms before you decide.