Payday Loans : A Cash Advance

3714 Words Jul 10th, 2015 15 Pages
Payday loans, which are also sometimes called a cash advance, is a short term loan that is due on your next payday. They generally have three features; they tend to be for smaller amounts, are due on your next payday, and require you to give the lender access to your checking account or to write a check for the amount due in advance that the lender has the option of depositing when the loan comes due. Payday loans are intended to be an option to people who are faced with meeting immediate deadlines as far as personal expenses. A majority of payday lenders charge a fee, sometimes called the finance charge, “which may range from $10 to $30 for every $100 borrowed. A typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate (APR) of almost 400%. By comparison, APRs on credit cards can range from about 12 percent to 30 percent” (What is a Payday Loan). Although, as of now, payday lending is subject to state regulation. Pew 's Safe Small-Dollar Loans Research Project classified states into three categories—Permissive, Hybrid, and Restrictive—based on their payday loan regulations. Pew defines permissive states, in which there are 27, as “Allowing single repayment loans with APRs of 391 or higher.” They define hybrid states, in which there are 9, as “Having payday loan storefronts but maintain more exacting requirements, such as lower limits on fees or loan usage, or longer repayment periods.” And they define permissive states, in which there are…

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