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Payday Loans Articles : Payday Personal Loans
A payday loan (also called a paycheck advance or payday advance) is a small, short-term loan that is intended to cover a borrower's expenses until his or her next payday. Typical loans are between $100 and $500 and are due in two weeks, with interest rates of up to 400% APR. On a two-week loan, fees average $15 for each $100 lent. The loans are also sometimes referred to as cash advances, though that term can also refer to cash provided against a prearranged line of credit such as a credit card.
Though payday lending is primarily regulated at the state level, the United States Congress passed a law in October 2006 becoming effective on Oct. 1, 2007 that caps lending to military personnel at 36% APR as defined by the Secretary of Defense. The Defense Department called payday lending practices "predatory", and military officers cited concerns that payday lending ruined low-paid enlisted men and women's finances, jeopardized their security clearances, and even interfered with deployment schedules to Iraq. Actual statistics showed that fewer than 5% of military enlisted personnel were payday-loan borrowers, however.
Some federal banking regulators and legislators seek to restrict or prohibit the loans not just for military personnel, but for all borrowers, because the high costs are viewed as a financial drain on the working and lower-middle class populations who are the primary borrowers.
Lenders say these loans are often the only option available to consumers with bad credit or who cannot get a bank loan, credit card, or other lower-interest alternatives. Research indicates that payday loans may assist financially disadvantaged consumers in surviving financial "shocks" and thus be welfare-enhancing. Critics counter most borrowers find themselves in a worse position when the loan is due than they were when they took the loan, with many getting trapped in a cycle of debt.
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