High-interest, short-term loans that can be borrowed by individuals who are in need of immediate cash when their payday is yet to arrive, are known as payday loans or cash advance loans. Usually, previous pay stubs, photo recognition and proof of income have to be presented by people when they are applying for these loans. When these loans need to be borrowed, a personal post-dated check has to be written to the payday loan lenders, and the desired amount cash along with an established fee is included in it.
The precise terms of these loans are described in legal documents that are presented by the lender. Annual interest rates, finance charges and late fees are included in the documents. The cash is provided to the borrowers once they have signed these documents. The due date of these loans is usually the same date when the borrowers receive their paycheck, and they are obliged to pay back the entire borrowed amount. Borrowers can even get the terms of the loan extended or “rolled over” if they are unable to pay on the due date.
The practice of payday loans is often utterly deterred by many financial experts. The annual percentage rate of these loans can rise up to 500% since these loans are lent over a very short period of time. As long as borrowers manage to repay the borrowed loan on the due date, these loans can prove to be an excellent source of immediate cash, despite the high interest rate.
On the other hand, additional interest fees and late charges can be incurred on the remaining balance if borrowers fail at paying off the entire amount of the borrowed loan on the due date. The original amount of the loan that was borrowed can also be equaled or exceeded by the accrued interest, if the loan is rolled over thrice. The interest rates that can be charged by payday loan lenders are not regulated by laws in a majority of states since they are lending private cash loans.