Payday Loan Business Remains Open During COVID

What Is A Payday Loan?

This page summarizes state statutes regarding payday lending or deferred presentment, which features single-payment, short-term loans based on personal checks held for future deposit or on electronic access to personal checking accounts. Best of all, you won't have to be concerned with making the monthly payments. And as far as cost, you will only have to deposit enough money into the bank account to cover the interest for one year. At 10 percent interest, that will be something less than $50 for the year.

The truth is: Payday loans are an extremely expensive form of borrowing money. They often carry triple-digit interest rates and include all kinds of hidden fees. One payday loan can quickly snowball into too much debt for one family to handle. Many payday borrowers come up short on their loan's due date, so they must take out a new loan to pay off the old one. Or sometimes, lenders will offer consumers additional cash if they take out a new loan to pay off the old one. This is called rolling over" a loan. Each time a loan is rolled over, the lender tacks on additional fees. This creates a cycle of debt from which some families never recover.

If you are having problems paying back the loan, the lender may offer you longer to pay. The lender may do this by giving you more time to pay the loan or by rolling the loan over. A rollover works by making a new agreement for the repayment of the original loan. Beware of extending your loan or agreeing to it being rolled over because you will have to repay more money to the lender as you will be charged extra interest, extra fees or other extra charges.

A small percentage of payday lenders have, in the past, threatened delinquent borrowers with criminal prosecution for check fraud. 29 This practice is illegal in many jurisdictions and has been denounced by the Community Financial Services Association of America , the industry's trade association.