A small temporary loan taken to bridge the borrower’s cash flow gap between paydays, is referred to as a payday loan. They are unsecured, high-interest short-term micro loans. These loans are usually arranged in cash, and the lender processes the check or takes out from the borrower’s checking account on the date of maturity.
The process:
Many states in the U.S have usury laws that prohibit interest rates if they exceed the annual percentage rates. For example if you need a payday loan, you would have to write a post dated check for $315 to borrow $300 for a period of two weeks; the extra amount being the finance charge, and the lender will give you his assurance to wait till the next payday. If you fail to repay, then the lender can deposit the check of $315. In most of the states the rollovers are forbidden, as the financial charge goes on increasing. In the U.S. this payday check has been prohibited in thirteen states.
Lenders:
Quite often these payday lenders are criticized. They are called the merciless loan sharks attacking the poorer section, low income areas, who are unable to comprehend the time value of money. Many people find...
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