Payday Loans: Questions That Are Frequently Asked

Millions of consumers rely on payday loans to meet their short-term financial needs. Here are answers to some of the most common payday loan questions.

What is a payday loan?

Payday loans can be described as a short-term loan, typically with a shorter-than-normal repayment window.

What is the typical payday loan repayment window?

Payday loans typically need to be repaid within 14 to 31 days - essentially by the borrower's next payday.

How do you apply for a payday loan?

To apply for a payday loan, the borrower needs to write a personal check for the amount borrowed plus any finance charges. The lender then will hold onto the check until the payment is due.

Borrower's also can apply for payday loans online by providing their banking account information. In these cases, the payday loan typically is deposited directly into the borrower's bank account.

Typically, your credit score does not play a role in obtaining a payday loan.

What are the ways in which to repay a payday loan?

A payday loan, including all finances charges, will need to be repaid in one lump sum. The borrower can pay the lender directly, allow the lender to deposit the check or pay additional finance charges to roll the loan over to another pay period.

What are the typical payday loan finance charges?

The average payday loan interest rate is around 400 percent. These finance charges typically are conveyed as a certain percentage of the total amount of the loan, including the actual finance charge.

How are the finance charges for a payday loan calculated?

Typically, finances charges for a payday loan are calculated as follows:

Face Value of Personal Check: $294
15 Percent Fee: $44
Amount of Actual Loan to Borrower: $250
$75 Fee: 459 Percent APR (if the loan is repaid in two weeks)

If the borrower is not able to repay the payday loan within the 14-day repayment window, he or she will be charged a second 15 percent fee, or another $44.

Total Finance Charges: $88
$88 Fee: 918 Percent APR (if the loan is repaid in four weeks)

What is a payday loan prepaid debit card?

A payday loan prepaid debit card is essentially a cash advance debit card. Instead of receiving actual cash, the borrower receives the loan on a prepaid debit card.

What are some of the benefits of payday loan prepaid debit cards?

Payday loan prepaid debit cards offer several benefits:

The borrower is able use the prepaid debit card to pay bills online.
Any funds deposited onto the prepaid debit card are insured by the FDIC for up to $250,000.
Many prepaid debit cards are backed by reputable credit card companies, such as Visa.
Many prepaid debit cards are accepted by millions of merchants worldwide and can be used to access cash from ATMs.

Are there any special fees associated with payday loan prepaid debit cards?

Payday loan prepaid debit cards do come with their own set of fees. Some of these fees can include:

Card purchasing fees;
Monthly account maintenance fees;
PIN purchasing fees;
ATM transaction fees;
Load fees; and
Account closure fees.

What are ways to reduce payday loan fees?

Ways to reduce payday loan fees include:

Shopping around for payday loan special offers, such as 50 percent off finance charges for the first 14 days.
Borrowing only what you need to get you by until your next payday.
Take every step possible to ensure that you can repay the loan within the repayment window.

Sooner or later, most people find themselves in need of quick cash. One option available to those in need of quick cash is the cash advance credit card.