Payday Loans Facts

A payday loan is a short term loan made by writing a check to a payday loan company. The payday loan company does not cash the check, rather it is held until your next payday for a fee. Payday loans do not require credit checks, and almost anyone with an active bank account and job can qualify for and receive up to $1,500 using a payday loan service.

Payday loan companies are available in all areas, as well as by telephone and Internet. In 2009, payday loan companies were an industry profiting more than $28 billion dollars. Because of the ease of obtaining the loan, many people have turned to this source for getting fast cash, often borrowing more money than they are able to repay.

Payday loans, like any other type of loan, has its pros and its cons. Payday loans are often targeted towards low income individuals whose credit is less than par. Most of these individuals can not obtain a traditional loan due in large part to their credit rating. While a payday loan can provide a solution to short term money needs, it is not as simple as one may think. Payday loans carry with them huge interest fees, sometimes as much as 400% of the value of the loan. Repaying the loan on your next payday may seem simple enough,however, this is where most people fall victim. Payday loan companies are in the business of making money. They are banking on the fact that you will be unable to repay the loan on your next payday. In lieu of repaying the loan, the interest fee may be paid and the payday loan renewed. Once this process begins, you may find it impossible to ever repay the full amount, leaving you to pay hundreds or even thousands more than the original loan amount in interest rates.

If you are unable to pay the interest fees or the loan, the payday loan company may file a lawsuit against you. They can garnish your paycheck to get the money. At this point you are also subject to paying court costs, attorney fees, and other miscellaneous fees to file the suit.

Only 34 states are authorized to conduct payday loans. In 2007, Federal regulations set forth certain requirements for payday loans, offering a bit of protection for those using the service. Payday loan companies are not allowed to use car titles to secure loans, and a contract must be used in all payday loans that are made.

If there are other choices for borrowing money, such as from a friend or family member, this is always the best option. If you simply must take out a payday loan, read the fine print before doing so. Borrow the minimum amount of money that you will need, and assure that the money will be able to be repaid on your next payday to avoid getting caught in the trap.

More information concerning payday loans is available on the web by visiting