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How Do Payday Loans Work?

February 9th, 2009

payday-loans-work.jpgWith many of you wondering about how payday loans work according to my recent search data, Eru Chawla has written this article that explains some of the basics about this particular niche industry. This genre is certainly not without its critics; in fact, many people have compared payday lenders to loan sharks online who charge usurious rates of interest and manage to entice borrowers into a revolving cycle of debt. Nevertheless, my preliminary market research has revealed that this is a very lucrative business, not just for the lenders themselves but also for affiliates and partners who can assist with targeted advertising and share in the profits. Now I just need to find a reliable affiliate program. :)

With needs of most people often overcoming their income, it is quite possible that you run out of cash when faced with some unexpected requirement. It may be a medical bill, urgent car repair, a mandatory trip or any other reason. Usually, most of us prefer credit cards to make ends meet during such situations but what if you have used all the credit available on your card? It is also possible that many of you do not have a credit card at all. You need not feel glum in such trying situations as you can now go for the payday loans available nowadays. The popularity of these loans has been soaring since the 1990s and now you may also find lenders offering payday loans online.

Check advance loan, deferred deposit check loan, and cash advance loans are some other names that refer to payday loans. They all are actually the same thing – short term loans. So, this kind of loan is granted for a period of two weeks or perhaps one month, usually long enough for you to receive your next paycheck.

These loans are often granted and passed within 24 hours, sparing you the unnecessary wastage of time in dire situations due to otherwise long legal formalities. There are only a few requirements that must be fulfilled for you to get approval for your loan amount. The foremost thing, assuming that you are applying for a loan within the USA, is that you should be a U.S. citizen. The next thing is that you should have either a savings or checking account and must be currently employed. Last but not least, you should be 18 years of age or older.

As these loans are extended on an urgent basis without much legal formalities, the interest charged on these loans is quite high as compared to other loans. Generally, the interest rate charged for every $100 that is borrowed is $15. Typical payday loan amounts range from $200 to $500 but some companies may offer up to $2500. Of course you must be mindful about your needs and borrow only the money that you cannot do without and will actually be able to repay within a reasonable amount of time.

Otherwise you will be forced to continually extend the loan, meaning that you will likely wind up paying more in interest charges than the original amount you borrowed in the beginning. You can also get tagged with additional fees and penalties, and if you just give up and completely default on the loan, you can easily wipe out whatever little credit rating you might have left.

So, it is always necessary to make a well-informed decision regarding the amount that you are willing to borrow when you consider how payday loans work.

4 Responses to “How Do Payday Loans Work?”

  1. comment number 1 by: Dorothy

    I am the webmaster of some mortgage/debt/credit/insurance, real estate related sites, and my sites are doing fine in major search engines. While searching in Google I have found your website and as we both are in the similar field, I would like to exchange links with your site.
    I have some healthy content pages in my websites with pr 3, 4 and will give you some healthy links from my websites.
    So if you are interested then kindly send me your link details. I will activate your links within hours.
    If you are not the concerned person, then kindly forward this mail to the webmaster concerned.
    Waiting for your reply.
    Dorothy Parker

    N.B: — This message contains personal, privileged, and confidential information and is intended only for the individual named. If you are not the named addressee, you are NOTIFIED not to disseminate, distribute, re-transmit, copy, or utilize this e-mail, and contents herein. Please notify the sender immediately by return email if you have received this e-mail by mistake. You are FURTHER NOTIFIED to delete this e-mail and any attachments, as well as any copies made thereof, from your computer system(s). The sender does not accept liability for any errors or omissions in the contents of this message and unless explicitly stated otherwise, does not intend to give legal advice or enter in an attorney-client relationship.

  2. comment number 2 by: Online Payday Loans

    Great post and helps people to realize there are options out there for people. I was really surprised by the link to the loan sharks and how that keyword is actually searched online for short term loans. There are lots of great resources online for those that want to stay current on the latest payday loan information and it looks like you are also providing good content for those that want to learn more about this industry.

  3. comment number 3 by: jones loan

    if you need a you can contact us we will be very willing to help

  4. comment number 4 by: Fredica

    Please help, I need a 6,500.00 loan fast, I have tried banks and private sources only to be scammed 4 times. Please send info how to apply for loan. zolabuttler@teacher.com

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