Econ Info

If you run out of money before the next payday, you can take out payday loans. Some people call them payday advances. No matter what you call it, it is a short term loan, normally for two weeks. When your next payday rolls around you pay off the original amount plus interest.

Depending on where you go for a loan the interest rate is typically between 15 and 30 percent. To make sure that you pay the loan off on time, you actually write a post-dated check when you take out the loan, including the interest. If you borrow 300 and the interest rate is 30%, you have to write out the post-dated check for $390.

The way this is supposed to play out is that the borrower is to return to the loan store on payday and pay off the loan plus the interest. If the borrower doesn’t show up to pay off the loan, then the lending store can deposit the check. If the store deposits the check and it bounces due to insufficient funds, the borrower has to pay that fee to the bank also.

In some cases when the burrower returns to pay off the loan, he immediately flips the loan and takes out another one. Flipping a loan is not legal in many states.

Tags: Payday Loan