While a specific definition is not there for a payday loan, it is generally a short-term, relatively expensive loan, usually for $500 or less, that is usually due on your subsequent payday.
According to your state law, payday loans could be obtained online or through storefront payday lenders.
Some General Features of Payday Loan are:
The loans are for little amounts, and several states set a restriction on the size of a payday loan. $500 is a usual loan limit even though limits range over and under this amount.
Repaid in One Payment
A payday loan is generally repaid in one payment on the next payday of the borrower, or on receiving income from a different source like a Social Security or pension.
The payable date is usually two to four weeks from when the loan was made. The definite due date is specified in the agreement of payday loan.
Write a Check Post
To pay back the loan, you usually write a check post-dated for the entire balance, this includes fees, or you supply the lender with authorization to debit the funds electronically from your credit union, bank, or prepaid card account.
Suppose you do not pay back the loan on or prior to the payable date, the loaner can cash the check or withdraw money electronically from your account.
Your capacity to pay back the loan while fulfilling your other monetary obligations is usually not thought about by a payday lender.
Check or Cash
The loan returns may be provided to you by check or cash, deposited electronically into your account, or loaded on a prepaid debit card. Other features of loan can change.
For instance, payday loans are usually structured for being paid off in a single lump-sum payment. Few state laws allow lenders to “renew” or “rollover” a loan on it becoming due in order that only the fees due have to be paid by the consumer and the loaner extends the payable date of the loan.
In a few cases, payday loans could be structured in order that they can be repaid in installments over a longer duration of time.
Expenditure of a Payday loan: Several state laws specify an utmost amount for fees of payday loan that ranges from $10 to $30 for each $100 borrowed.
A usual payday loan for two weeks with a $15 for every $100 fee is equivalent to an annual percentage rate (APR) of nearly 400 percent. In contrast, on credit cards, APRs can range from around 12 percent to around 30 percent.
In several states that allow payday lending, fees, the cost of the loan, and the maximum amount of loan are capped.
In your state, the laws could regulate, permit, or ban these loans. Few states don’t have payday lending since these loans aren’t allowed by the law of the state or since payday lenders have determined not doing business at the fees and interest rate allowed in those states.
In states that allow or regulate payday lending, you could be able to find additional information from your state attorney general or state regulator.