A payday loan is a short term loan that you promise to repay on your next paycheck. A payday loan is sometimes called a payday advance.

You usually have to repay your payday loan the day you receive your next paycheck or earlier (usually within two weeks or less). The amount you can borrow is usually limited to 50% of your net paycheck, that is to say the final amount you have left after any deductions from your pay, as taxes income. For example, if your net pay is $ 1 000 every two weeks, your payday loan could not exceed $ 500 ($ 1 000 x 50%).

Here’s how a payday loan works. Payday loans are a form of cash advance on your future paycheck. The borrower requests a loan for up to four weeks and the necessary documents, often provides evidence of employment and identification. In return for the payday loan, the borrower gives the lender a postdated check for the amount of the loan plus all fees.

Your payday loan interest rate is how much of the credit cost you about. Your payday loan interest rate is the key to find out the loan annual percentage rate (APR). The APR is all the costs of the loan (including fees and the payday loan interest) by the lender for the duration of the loan calculated. Payday loan interest rates often lead to a high of April, because they are healthy, short term. As a conscious consumer, you need to pay attention on payday loan interest and April, leading to accept loans to decide.

There are Two Types of High Interest Loans and Short Term

The company payday loans trying to attract those who are collecting social security and workers receiving a paycheck. Lenders of payday loans that consumers typically want to sign a personal check with the date 31 days in the future from the day you get the loan. This allows the company to achieve some of their wages if the loan is not paid. Sometimes the lender will make you sign an agreement which allows the lender to withdraw money from your bank account. This type of authorization is called an electronic funds transfer. After 31 days from the date you obtained the loan, the consumer is obliged to pay the balance of the loan or do not have to pay the interest and renew the loan.

Most consumers choose to renew their loans seven or eight times, and so pay a percentage of interest for a longer period than initially thought they would last. A $ 300 loan is a debt of $ 1420 after eight months and then becomes $ 2000 after one year. Some consumers make the mistake of getting a second, third or fourth payday loan to pay off the original, and for that reason are in danger of accumulating a lot of debt.

Auto Title Loans
The second type of short-term loans are loans for car title. Lenders that offer this type of loan try to entice customers who own their own cars. Lenders typically offer the consumer a few thousand dollars of loan to a very high interest rate (usually 200-300%) and collateral use the auto consumer title. Most of these lenders use a balloon to plan loan repayment to the consumer. In the case of a loan of $ 3000, the lender will require the consumer to pay $ 400 a month for seven months and to pay a balloon payment in the amount of $ 3,000 in the eighth month. When consumers can not afford the latter balloon payment, which is the case in most instances, the lender becomes the owner of his car and sell it.