Understanding The Process
By far the most popular form of short-term borrowing, these offer modest amounts of money over a fairly brief term to help borrowers in a financial pinch. This service has distinct characteristics that separate it from other lending products, such as title loans, cash advances, and personal loans. Generally, a payday advance is accessible to almost all borrowers with steady incomes and employment. Additionally, unlike a title or secured loan, it requires no collateral because your paycheck eliminates that need. Read on to find out how you can turn your check into cash when you need it.
- Most cash advance borrowers earn $25,000-$50,000 annually
- 68 percent of customers are under age 45
- 42 percent of pay day borrowers own their own homes
- 94 percent of borrowers have at least a high school diploma, and 56 percent have some college or an advanced degree
- 100 percent have consistent incomes and active bank accounts, both of which are prerequisites to obtaining one
Debunking the Myths
Due to the actions of a small minority of unscrupulous lenders, companies have not received a fair shake in the media. Proprietors are repeatedly depicted as predators who exploit the poor, the elderly, and minority groups who are typically already in compromised financial situations. In reality, the notion that these companies target the downtrodden is patently false. The vast majority of those who seek out options online are typical middle-class, hard-working Americans who may not have the requisite savings to cover unexpected financial emergencies.
History of the Payday Loan
The modern form of this type of lending reflects a significant evolution over the past few decades. Until the advent of the Internet, they were offered only by brick-and-mortar proprietors. The original iteration required borrowers to visit a company in person and provide a postdated check for the amount the customer wished to borrow plus interest and fees. The company would then issue the money and hold on to the check until the payment date arrived, at which point they cashed the check. Typically, the company would wait two weeks before cashing the postdated check.
When the Internet became a staple in American homes, however, the industry underwent a radical transformation. In the late nineties, the industry saw a drastic shift from local-market-based proprietors to online companies. Online lending sites proliferated, and the industry grew exponentially as the Internet readily lent itself to the accessibility and convenience of the advance. The online process streamlined the application process and eliminate virtually all need for paperwork. Rather than exchanging checks as in the past, they could now directly deposit funds into bank accounts electronically and withdraw repayment in the same manner. With more lenders than ever in the industry, these quickly became more affordable and more mainstream, appealing to a wider cross section of borrowers.
Regulating the Industry
The regulation of products occurs primarily at the state level, which gives rise to substantial disparity among states as to what interest rates, fees, products, etc. are permitted by law. At present, 34 states have regulations governing payday loans. Typically, these regulations involve caps on amounts, restrictions on the length of the terms, and limits on who can take out cash advances and how often. For the most part, they are regulated by usury laws, which are determined on a state-by-state basis. In today's parlance, usury is a term that describes the practice of lending money at unreasonably high interest rates. Usury laws typically set the maximum rate at which financial institutions can give money, and they are subject to these laws where they exist.
Some regulations at the federal level also impact lending in several ways. For one, cash advance lenders cannot give to active members of the military. Secondly, all companies must adhere to the federal Truth in Lending Act (TILA), which requires the disclosure the cost and rates of a pay day loan clearly and completely in the agreement as well as on any advertisements promoting specific cash advances.
Another option almost all lenders offer to their borrowers is a consolidation loan. If you have multiple outstanding lines of credit, your lender may allow you to roll them into a single option with one due date. This option may also assume the form of a rolled-over payday advance, which means if you cannot repay the money on the original due date, you might be able to roll the advance over for additional time. In so doing, you essentially take out another one, but the two remain consolidated in one product.
Obtaining an Advance
Unlike other short-term borrowing options, cash advances are available only through lenders dedicated exclusively to payday-related products. You cannot obtain a traditional payday loan from a bank or credit union because those providers require a credit check and/or collateral in order to borrow even small sums of money. To get a paycheck loan, you will need to find a company and request an offer. They will then tell you how much you qualify to borrow, for how long, and how much the it will cost. You can request this information for free from one of the lenders in our network at any time through our site.