Understanding How Quick Payday Loans Work

Published on March 28th, 2014

There seems to be more and more misinformation in the general public about how quick payday loans actually work for the benefit of both the borrower and the lender. Of course, just as with any type of loan or credit, it is important to understand the costs involved and to ensure that, as the borrower, you have the ability to follow all terms of the loan.

Many people mistakenly think that quick payday loans are the same as a traditional type of loan that is paid out over a long period of time. They are very different with short term loans, also known as payday loans, designed to be paid off on your next payroll deposit. This means that you don’t have months and months of payments and interest, you just pay a flat fee for the service of borrowing the money and it is all paid back with your next check.

Fees and Costs

Since there is no interest charged on a quick payday loan you are charged a flat fee based on the amount that you borrow. The amount of this fee is set prior to you obtaining the loan so it is all determined up front and in advance. The lender will not charge any additional fees provided that the loan is paid back according to the terms outlined in your original acceptance of the loan amount.

Rollovers with Quick Payday Loans

Some states, but not all, allow the option for the borrower to request an extension on the loan repayment, which may also be known as a rollover. However, along with this extension will come additional fees. These fees can be significant and it is important to make every effort to repay the loan within the terms. In states where a rollover is not allowed this is not an option, but you are still in violation of the agreement.

Many people effectively use quick payday loans to get through tough financial times. However, these loans are not designed to be used as revolving credit, but they are a good option for those emergency situations. Carefully read all the information about the loan, including repayment requirements, before deciding if the loan is the right option for your financial needs.

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