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April 1, 2008 |
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Payday loans offer quick access to cash for customers who otherwise might have no access to credit. They have been in the spotlight recently due to their high APRs, fees and their prevalence near military bases. A payday loan is a small short term loan of cash. Loans are generally made for no more than $500 and must be either repaid or refinanced on the borrower's next payday, which may be no more than one month (sometimes two weeks) in the future. The loan is secured by a post-dated check from the borrower, which the lender will deposit if the borrower fails to pay on time. Some payday lenders allow borrowers to refinance the loan simply by signing a new agreement and paying additional fees. Others require that the original loan be paid in full and a new loan made 24 hours later. Occasionally lenders allow borrowers to repay a portion of the balance along with new fees and refinance the remaining balance, but this is rare. |
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