What Is a Payday Loan Company?

In times of emergency and utter need, you can ask the help of a payday loan company to cover your expenses. Loans are usually up to $1,000, and the repayment is your next payday. Without the need for a credit check, all the loaner needs is a bank account from which the payday loan company can debit the repayment amount.

Function

• When you have to augment your finances quickly due to emergencies or bills that you must pay immediately to avoid interruption of service, you can contact a payday loan company for assistance. Keep in mind, though, that repayment of the debt is almost immediate, usually spanning 30 days from the time of the loan. Together with the finance charges, the company will debit the loaned amount from your bank account. It is imperative that you have the funds for repayment available in your account on the scheduled date. If funds are unavailable, more finance charges and other fees will accrue.

Types of Services

• Apart from a cash advance or a payday loan, payday loan companies offer different services such as prepaid debit cards and gift card services. The amount that you spend depends on the amount that you deposit; and you avoid overdraft fees if you spend within the amount you deposit. Gift cards work almost the same as prepaid cards, but instead of spending it yourself, you can give the prepaid card as a gift for special occasions. Check-to-Card services, on the other hand, send your payroll or other checks to a prepaid card, saving time and effort in cashing checks. Some companies also offer money transfer services.

Law Protection

• Usury laws govern the lending rates and terms of payday loan companies. These laws also check on the allowable amount that companies can lend to consumers and limit the fees that the lender can charge. Some states such as Delaware and Idaho have no limits on the amount the lender can charge, and some states such as Pennsylvania and Vermont "have usury laws or small-loan rate caps that would make payday lending illegal under the rates usually charged," according to Bankrate. Arm yourself with knowledge of your consumer rights and ask for more information from a lender before binding yourself in an agreement.

Considerations

• Payday loans usually cost more than a normal loan or using your credit card. Consider if there truly is a need for a cash advance before applying for a payday loan. Check on other alternatives that you may have, say a credit card emergency fund instead. If the bill can wait or can be funded by other sources, check on those available options. Payday loans are best for one-time emergencies only and should be immediately paid.

Warning

• Intrest rates at a payday loan company is about 400 percent of the amount you borrow per year. Considering the 400-percent rate, you should think twice before using payday-loan services. Weigh your options with other alternatives other than asking for the services of a payday loan company. Also, check the credibility of the company and see if they can offer lower interest rates. Be sure to read and thoroughly understand the fine print of the contract before signing the agreement.