With a payday loan, a lender will grant you short-term, high-interest credit based on your income. Usually, a portion of your next paycheck serves as its principal. payday loans, also known as check advance loans or cash advance loans, are short-term, instant credit products that carry high-interest rates.
Common characteristics of payday loans include:
- The loans are for tiny sums, and many states have a cap on the size of payday loans. The general loan limit is $500, while there are limitations above and below that amount.
- A payday loan is often repaid in one lump payment when funds get collected from another source, such as a pension or Social Security, or on the borrower’s following payday. The loan agreement’s conditions indicate the exact due date, and the payment deadline is typically two to four weeks after the loan gets negotiated.
- Generally, you have two choices for repaying a loan: Give the lender permission to take money from your bank account, credit union, or prepaid card account, or postdate a check for the total amount plus costs. If you don’t repay the loan by the due date, the lender has the right to cash your check or electronically deduct funds from your account.
- A payday lender typically won’t take your ability to repay the loan while still fulfilling your other financial responsibilities.
The loan proceeds may be transferred to your account online, via check, cash, or pre-loaded onto a prepaid debit card.