Quick cash loan questions and answers

What is a payday loan?

A payday loan, also known as a quick cash loan or cash advance loan, is a lending product designed to offer short-term cash to those in need. They are available at stores that specialize in them and are not available at banks.

How much can I borrow?

The amount varies from state to state, but typical amounts are $100-500.

How do they differ from bank loans?

They are not installment loans; they are offered for two week periods. At the time the loan is granted, the borrower writes a check for the amount, plus the fees and postdates it for a date two weeks later. At that time, the borrower can either repay the amount plus the fee or the lender can cash the check. That’s all there is to it.

How much are the fees?

The fees vary widely, but typically cost about $10-30 per $100 borrowed, with $15 being about average. So if you wanted to borrow $300, you would write the check for $345, which is the amount you would need to repay two weeks later. These fees, when considered on an annual basis, can amount to an interest rate of anywhere from 250-1000% annually, although, as the lenders note, the products are intended for two weeks only. Lenders are required in most states to post a sign informing borrowers of the annual interest rate paid on the amount borrowed.

What if I cannot repay in two weeks?

Then you must “roll over” the loan. This consists of paying the fee a second time. In the case of our example above, you would pay another $45. The original total of $345 is again due two weeks later. Most states have limits regarding how many times a loan may be rolled over.

What if I cannot pay?

The lender will probably deposit your check, which will likely bounce. At that point, you will have to pay bank fees for the bounced check as well as additional fees to the lender. In some cases, payday loan stores will sue people who do not pay.

How can I get the best deal?

Shop around. Most communities have many stores that cater to short term lending needs; you may find a bit of competition if you compare one lender to another. The best way to minimize your expenses is to make sure that you do not extend the loan beyond the two week period. The industry is full of stories about people who took out loans for $200 and ended up paying back $1000 or more. These are short term lending products. Make sure you keep it that way. Some credit unions are offering alternative lending options, you might check with one of them first.

These products work well when used as intended - for a two week, every-now-and-again shortage of cash. If you have chronic problems with debt, these loans are probably not for you.

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