How Do Payday Loans Work Blog

Cash advance loans are very popular these days.  Both consumers trying to get cash loans, and critics trying to get them regulated.  Both sides have been making points and arguments that are both for and against short term loans. Short term loans are usually loans that are paid back within a couple of weeks, or the next payday.  Thus the reason short term loans are often called cash advance payday loans.  These loans are setup for a small amount, and the money needs to be paid back in full within the short period allowed.  Typically, these loans have a set fee with them, and they don’t charge interest. However, many critics like to use APR interest rate to help make their point that these loans are bad.  The problem with using APR is that there are no installment payments, so how can they accurately provide an APR, or annual percentage rate, when there are no installment payments.  Of course, using this calculation helps their side of the cause, so they like to use it all the time and try to scare people from using them.  The fact is  that many states already cap the service fee that cash advance places charge at $15 per $100 borrowed, or 15%.  That’s it.

Now, if the person doesn’t pay it back on time, and needs to refinance it again, there will be another fee.  This means that as long as the person pays it back on time, like with most loans, there rate is pretty fair, but if they don’t pay it back on time then there are more fees, which is also the case with any loan.  If a person doesn’t pay back a credit card, what kind of fees would they see and what type of APR would that be.  Or, maybe take out a personal loan and not pay that back or refinance it a couple of times and see what those fees or APR is like.  If the critics are going to regulate the short term loan industry, then they need to do it for all loan industries and put the same procedures in place to protect consumers across the board.

Now, what will it take to get a cash advance.  Most of the time all that is needed is a bank account and ID.  In most cases, no credit check or no employment verification is performed, which makes this process very appealing to most people.  In addition, if the person only needs the money for a short period, than getting a long term loan wouldn’t be the best case because they often have penalties for paying it back early, or the person is stuck paying the loan for the whole term, which would cost more than the $15 service fee for getting a cash advance.  Getting a cash advance is pretty easy, and thus the reason they are so popular.  However, people have to learn how to use them properly and to only take what they can pay back in a reasonable time frame.  Make to sure to read everything before signing, and pay the loans back on time. As long as they are used the right way, cash advance payday loans can be very useful.

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