Payday loans are essentially short terms cash loans. There is no collateral asked for, by the payday loan lender and the loan is offered on the personal check of the borrower that has been post dated, or it could even be given based on the electronic access to the bank account of the borrower. In some cases it is seen that a lender can electronically access the bank account of the borrower, as the borrower has signed over the electronic access to the lender.
The Terms for Payday Loans
The loans offered are not more than $1000 and are not less than $100. However, the maximum and minimum limit is dependent on the maximum limit determined by the State. The loan term on an average is about two weeks. Moreover the annual interest for the loan just about hovers around 470% that is the APR. There are also finance charges that are a part of the loan and on average every $100 of loan taken will claim a finance charge between $15 to $30. If you want a longer repayment period for these payday loans then be prepared to shell out anything from between 390 to 780% APR of interest rates for two week loans.
Comparison to other Cash Loans
As you might have understood from the figures given above, Payday Loans are definitely more expensive than the other traditional types of loans available out there. The reason being that this is a short term loan and there is absolutely no collateral needed for the same. Therefore lenders charge an extra bit of money and borrowers are not unwilling to pay them. After all they are getting a loan without any collateral and only on the promise of their paycheck.
The Legality of Payday Lending
Payday loans lending is not illegal and has been authorized by as many as 37 States. However, there are still 12 States and two territories that have not brought about any authorization for Payday loans and associated legislation. Also there is one State that allows licensed lenders to offer Payday loans. As can be seen you should have very little doubt as to the legality of the lending process of payday loans. It is advisable that you get more information from the various sources to understand more about the legislation in place in the States that offer Payday loans.
If you are in need of some quick cash and don't know where to get it from as all avenues are closed, then you must think about Payday loans. There are a number of people who are caught in a vicious cycle of payday loans and don't know how to get out of it. This is because their paychecks are claimed by the lenders and they are left short of cash in that month. They take another payday loan to tide them over and thus are caught in a situation of their own making.
Even if you take payday loans, only go for an amount that you can pay back without it taking a toll on your future finances.