The payday loans in most states are not regulated and the loan providers are allowed to charge any fee and annual percentage rate that the borrowers are willing to pay. However, this microloan market is in essence regulated by the competition amongst the various lenders, which strive to offer terms that are more favorable in order attract more customers. The statistics show that the average amount borrowed is typically between $100 and $500 and the money is generally borrowed for one to two weeks.

The payday loans work in the following manner – the applicant needs to be presently employed, meet a few other basic requirements, and as long as they qualify for a loan, they are required to write a check to the lender. The check is for the full amount of the loan plus the fees and the interest rate (commonly referred to as the cost of the loan), and the lender agrees not to cash that check until the maturity day of the loan. If the borrower wishes to “roll over” the loan, then they are required to pay additional fee.

Even though the interest rates and the fees are higher than the interest rates and the fees of the traditional loans, this could be easily explained by the short-term nature of the payday loans. An interest rate of 390% might sound exorbitant, but on a $100 loan, this interest rate translates to a total cost of $15, which most borrowers are inclined to pay. The advantages of the payday loans come from the fact that most lenders do not run background or credit checks on the borrower, which results in an approval rate often as high as 90%.

In order to apply and qualify for a payday loan, you need to be a US citizen, 18+ years old, currently employed, and have your paychecks directly deposited. These are the most common requirements that the lenders, who operate online, have, but they could vary from one lender to another. Not all lenders are providing cash advances to military personnel and their dependants, so if you fall into that category, you need to speak to the lender and find out what their policy is.


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