A short term loan is often referred to as a payday loan or cash advance. Loans of this nature are usually quite small, often less than $500.00 and are structured to be repaid on the borrowers next payday. These types of loans have three basic features; they are for small amounts of money, the loans become due on the next payday of the borrower and the borrower must provide the lender with direct access to his or her checking account or to give the lender a post dated check in the full amount that the lender can cash if warranted.
Other loan features, including short term loan rates can vary. Most loans are structured so that the amount borrowed plus the fee is paid off in one payment on the borrowers next payday. There are however other payments which include interest-only or roll-overs or renewals. Depending on the situation these types of loans can be structured in such a way that the debt can be repaid over a period of time through installments.
Once the terms of the loan have been agreed the lender can provide the borrower with a check in the agreed upon amount or cash. With the advent of modern technology, the lender also may elect to provide the borrower with a debit card which has been loaded with the amount borrowed or the money may be deposited directly to the borrower’s checking account electronically.
The short term loan rates vary; in some jurisdictions it may be as low as $10.00 per $100.00 borrowed while in other jurisdictions it may be as high as $30.00 per $100.00; a $15.00 fee is typical. There are certain factors that enter into how much can be borrowed and the amount of the fees. Taking the typical fee of $15.00 per $100.00 borrowed, if you were to borrow $300.00 until your next payday you will be required to repay $345.00.
In the event you do not repay the loan as agreed the lender may charge a late fee, in the event the check that was issued when the loan was granted is returned NSF there may also be a returned check fee. These additional fees are governed by state laws, most of which are a little different.
The wise borrower will know exactly how the electronic fund transfer is set-up to work. If the arrangement is to allow the lender to direct debit your checking account you need to know exactly when the money will be withdrawn and how much, in this way you can avoid paying any fees other than those which you agreed to.
