Payday Loan Problems

A payday loan is a very short-term loan given until the borrowers next payday; usually for sums under $1,000. These are also dubbed cash advance loans, post-dated cheque loans, payday cash advances and deferred deposit cheque loans, and they all have one main function: they get you instant cash.

The sort of people who use these type of loans usually have explored all other options and are desperate for cash. Most payday places don't do credit checks - so those with bad credit can get this type of loan with little or no problem.

Once you fill out an application and give the lender things like photo ID and a pay cheque stub, you sign a loan agreement and give a postdated cheque for the total number you're required to pay, which includes the loan plus all fee payments. Then, you get your money. The postdated check is held onto until the loan payment due date, which is typically two weeks afterward. The loan company subsequently deposits your check (unless you have replaced the check or have already paid back the loan).

The typical requirements to obtain a payday loan are minimal and will probably include:

• That you are currently employed or have a regular income stream.
• You are required to be of legal age - usually 18 years of age.
• You have a current bank account that has been in existence for at the very least three months.
• Your account proves a monthly deposit of at least $1,000 from your payroll, or $800 for individuals on a fixed income.
• You shouldn't have any outstanding payday loans.

You will usually also need to provide:

• Photo ID, like a driver's license or any other kind of government-issued ID.
• A recent bank statement that's not more than 30 days old.
• A personal check marked "VOID".
• A copy of your most current pay stub.

These types of loans, while easy to attain, are typically pretty expensive. Payday loan companies give the borrower the sum of the check minus their percentage (They get their money up front). Fees (sometimes referred to as finance charges) are usually about 20% of your cash advance amount thus for a $100 loan the fee is $20, for a $700 loan the fees $140 and so on, the annual percentage rate for payday loans can range from 300% to 1500%.

The most important thing to consider is your ability to pay off the loan, if you are short of money this pay period will you be short of money during the next pay period (don't forget that you also have to repay the loan out of your upcoming paycheck). Some borrowers notice that once they start with a payday loan they must borrow money the next pay period to meet their obligations and then repeat this (pricey) borrowing cycle again and again for a while.

These loans are just like any other kind of debt, but they are judged to be high-risk loans. If a person discovers that they are not able to pay back the loan, the payday company can ask for compensation for the face value of the cheque, court costs and late charges, along with NSF fees. Once a judgment is acquired, the lender may resort to using a collection agency or attempt to garnish your wages.

A large number of payday loan companies go on to list overdue accounts with the credit bureau - something that could impact your ability to get credit down the road.