top of page

A Closer Look Into Loans Like Wonga

A payday loan or cash advance is a small, short-term financial instrument that allows a borrower to cover his or her expenses until the next paycheck. Typically, the amounts of such loans range of $100 to $1500, on 10-14 days term and have enough high interest rates (APR) from 390 to 900 percent. Payday lending is regulated at the state level - each state has its own laws regarding payday loans. Meanwhile, the U.S. Congress passed a law in October 2006 that limits lending to military personnel at 36% APR. The Defense Department was concerned that payday lenders could cause financial challenges for soldiers and even jeopardize security clearances. Some federal banking regulators are trying to limit or prohibit payday loans not just for military personnel, but for all customers. The high interest rates are considered as a hard financial blow to the lower and middle class people who are the primary borrowers. Checkout Fast Loans for more info.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Retail lending. Customers come to a payday lending store and qualify for a small cash advance in the range of $100 to $500 with payment on the borrower's next paycheck. As loan charges, the customer will pay from $15 to $30 per $100 borrowed for 14 days period, which translates to interest rates of 390 to 780 percent (APR). On the due date the borrower returns to payday lending store and writes a check to his lender in the full amount of the cash advance plus charges. If the borrower does not repay the loan, the lender may process the check traditionally or through electronic withdrawal from the borrower's bank account. If there is not enough money to cover the check at the checking account, the customer will face extra fees from his bank in addition to the costs of the loan. Meanwhile, the most of payday lenders offer an extended payment plan with no additional fees for customers who can not pay out their loan at the due date. In several states like Washington, extended payment plans are required by state law.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Internet lending. You can get a payday loan not only from payday lending store, but online through special lending websites. Typically, a customer fills out a simple online application form, where he or she indicates required personal and bank account information, Social Security number and employer information. Some lenders require fax copies of a check, a recent bank statement, and signed paperwork. After instant approving the loan amount is direct deposited into the borrower's checking account. On the due date loan payment with fees is electronically withdrawn from borrower's account.

Examples. For example, a borrower wants to get a payday loan. The borrower will write a post-dated personal check for $500 to borrow $570 for up to two weeks. The payday lender agrees to hold the check until the borrower's next paycheck date. At that time, the borrower has the option to redeem the check by paying $570 in cash, or renew his loan by paying off the $570 and then immediately applying for an additional loan of $500, in result prolonging the loan for another 14 days period. However, in many states extending of payday loans is not allowed by state law. In states where there is an extended payment plan, the borrower could choose to opt into a payment plan.

​

​

​

bottom of page