Part 1
A payday loan is a small, unsecured, usually high interest, short-term cash loan. In most cases, consumers write a post-dated, check for the advance amount, plus a fee. The lender holds the check for the loan period and then deposits it, or the customer returns with cash to reclaim the check. They are also often called cash advance loans, check advance loans, post-dated check loans, or deferred deposit check loans.
In general, payday loans are extremely expensive. You end up paying an annual percentage rate (APR) that may be several hundred percent. Let's say you write a personal check for $575 to borrow $500 for up to 14 days. The payday lender agrees to hold the check until your next payday. At that time, depending on the particular plan, the lender deposits the check, you redeem the check by paying the $575 in cash, or you roll-over the check by paying a fee to extend the loan for another two weeks. In this example, the cost of the initial loan is a $75 finance charge and 391 percent APR.
Under the Truth in Lending Act, the cost of payday loans - like other types of credit - must be disclosed. Among other information, you must receive, in writing, the finance charge (a dollar amount) and the annual percentage rate or APR (the cost of credit on a yearly basis).
According to law it is mandatory for the loan offering companies to inform the loan seekers of this relevant information beforehand. To save yourself from being tricked it is always better that you make sure that the company is registered with the Better Business Bureau (BBB). Once you equip yourself with every piece of information, ponder over it and make a judicious move.
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