About Payday Loans

If you've never borrowed a payday loan before or you'd like more information on how they work, this page will help you. Read on for the basic facts consumers should know before they find payday loans.

What a Paycheck Loan Is

A payday loan can be referred to as a cash advance, a deferred deposit loan, or a paycheck advance. These names all refer to small loans with brief terms. Most payday loans are due the next time you receive a paycheck, although this varies by lender. Borrowers pay a finance charge to compensate the lender for the payday loan. If you find payday loans from storefront lenders, you usually have to give the lender a postdated check as a form of collateral. Finding payday loans online is a bit different. Instead of giving your lender a check, you'll give them an ACH authorization to take the funds out of your bank account electronically on your loan's due date (varies by lender). This process is similar to the direct deposit process your employer uses to give you your wages every few weeks.

Eligible Borrowers

Part of what makes payday loans so popular is that their standards to qualify are not as strict as those of most other lenders. Payday lenders tend to have higher borrower acceptance rates than other financial institutions (varies by lender). Lenders set their own eligibility rules, so you will have to ask your lender about specific standards for approval when you find payday loans. Commonly, payday lenders have a minimum age, minimum income, employment, citizenship, and bank account requirement, among others (varies by lender). Your lender should let you know fairly quickly whether you meet the applicable qualification rules.

Accessing the Funds

If you find payday loans and are approved by your lender, the funds will most likely be sent through an electronic transfer to your bank account (varies by lender). After the transfer is complete, you can access your funds just as you would with regular cash. You can make cash withdrawals from your account, write checks, or use your debit card to spend your loan. Of course, when the due date of your loan arrives, you will need to verify that your account balance is large enough to repay your lender. Typically, lenders remove the repayment from your bank account in the same way they deposited the money-with an electronic transfer (varies by lender).