Did you know that, under US law, a payday lender can only rely on industry standard collection practices in order to collect their debts? In the past, some have threatened to prosecute borrowers for check fraud if they became delinquent on their loan. This is now illegal.
Payday loans are small, short term, and unsecured cash loans, that are also known as cash advantages. The general idea of a payday loan is that the borrower will repay the loan, with interest, once they receive their next paycheck. These loans are not meant to address long term financial issues, but rather, unexpected, temporary debts that make this type of financing necessary. In Illinois, it is possible to have a payday loan for no more than 45 days. Borrowers can receive in person loans, or payday loans online.
In the past, the usual place you could obtain a payday loan was small stores that specialize in selling multiple, similar services, like pay by the hour computers and wireless money transfers out of the country. Today, many people are accessing payday loans online instead. Payday loans online have advantages and disadvantages. On the one hand, they make these loans more accessible, and possibly more easy to pay. On the other hand, the ease of access can also encourage people to take on loans impulsively. Payday loans online can be a useful service but as always, borrowers should only take on loans they feel confident they can repay.
Payday loan lenders do take on a fair amount of risk in the practice, seeing as how payday loans have a six percent default rate. This is partially why the lending rates are quite high compared to more long term borrowing solutions. The comparison between rates is not very meaningful in establishing which type of loan is better, however, since long term and short term loans solve different problems. A 200 dollar one week loan, for example, might have a 15 dollar charge. Over the course of a year, this would be incredibly high, but the very benefit of payday loans is that they are short term.