subject: Payday Advance Loans: Types And Differences [print this page] As the US economy began to experience the effects of recession, many eventually yielded to these negative effects. Investment spending, employment rates, and business revenues all went down, while bankruptcy and unemployment rate suddenly rose. Household incomes across the country drastically suffered because of salary delays, salary cuts, and workforce downsizing.
Most Americans affected by the crisis, especially those who are employed, resorted to payday loans, unaware that this lending scheme is exactly one of the major reasons for the current recession. These loans serve as extra funds that can provide for the familys needs while the expected income is delayed. There are companies who still run this kind of business, lending money to individuals and charging a certain percentage of profit or interest rate upon payment.
Payday loans, or more popularly known as paycheck advances, work the same as other forms of loans. A person can borrow a certain amount, usually equal to his or her wages, from a lending agency. The lender and the borrower enter into a contract stating that payment will be taken out automatically from the borrowers account during payday. The idea is as simple as receiving ones wages early from another source.
Payday advance loans are part of a fast-growing business that operates in two major lending processes: retail lending and online lending. Retail lending operates through a borrower entering into a lending contract with a payday lending agency, with payment due at the borrowers next payday. Interest rates can be as high as 30% on the payments maturity date or due date.
On the other hand, there are lending companies who operate online or through the Internet. Online lending can be a lot easier than retail lending because money can be transferred electronically to the borrowers account upon application. During online application for payday advance loans, the borrower is required to fill out an application form with personal details, such as social security number and bank account information.
However, online lending can be disadvantageous because the mode of payment is automatic. Payment is automatically taken from the borrowers checking account on the due date, unlike retail payday advance loans with due dates that can be extended or adjusted when necessary.
