How Do Payday Loans Work Blog

Many places today advertise cash advance payday loans as being a quick and easy fix to cash problems. Although they do provide cash when money is tight, its a good idea to have a way to pay them back to avoid more fees and penalties that will make this already costly option even more expensive.

The reason is that short-term loans don’t provide installment payments. The money is loaned to the borrower for a short period, usually two weeks or until next payday, and they are charged a fee based on the amount of money borrowed. In many states the amount that can be charge for the service is capped between $15 - $25 per $100 borrowed. This means a person who borrows say $300 for two weeks would have to pay a fee of around $45 - $75.  The full amount borrowed is due at the end of the term so the person who borrows $300 would pay back around $350 after two weeks.

If a person is already struggling to make it, and then has to pay back $350 in just a two period, they should have a good means of income to stay current. The problem is that payday loans don’t provide any options for installment payments.  So, a person who needs to extend the loan has to renew or refinance the loan again and is required to pay the fee for the service again.  This means that a person who gets a $300 cash advance and can’t pay it back when it is due is force to refinance it again without getting any new money.  Now, the $300 original loan that was suppose to be around $350 is now up to around $400, if not more.  This cycle will continue until the person is able to pay back the loan.

If a person is not able to pay the loan back on time, they could wind up paying much more for the loan and it increments every two weeks.  With this in mind, it’s a good idea to make sure to have a means to pay back a cash advance payday loan before getting one.  Although people can find no employment verification cash advance, and they can be a good reliable source for cash when money is tight, don’t get a payday loan without a job or a source of income to pay it back on time.

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