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Payday loan
A payday loan is a loan for a short term that does not exceed $500 and does not require a credit check.
Though application for a payday loan is quick and easy with no documentation needed to be faxed, it comes at a very high price.
Check cashers sponsoring companies make short-term, high-rate loans, where a borrower writes a personal check for the amount he or she wishes to borrow.
The fees charged for payday loans normally go by a percentage of the face value of the check or a fee charged per amount borrowed.
Any extra extension of the loan will be tied to additional fees.
It all boils down to one thing – a payday loan, secured by a personal check is quite expensive credit.
Payday lenders are commonly owners of small stores and typically give cash secured by the lender’s post-dated check that includes the loan principal and accrued interest.
Most states in USA have laws that prohibit interest rates in excess of a certain annual percentage rate.
Payday loan in those states pass through a bank chartered in another state.
Payday loan makers state that the interest on a payday loan is less than expenses on bounced checks or late credit card payments.
On March 1, 2006 the North Carolina Department of Justice announced the state had negotiated agreements with all the payday lenders.
The terms of agreement do not allow lenders to make new loans but instead collect principal only on existing loans and to pay $700,000 to non-profit organizations.
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