A payday loan, which may also be called a cash advance, is a short-term high interest loan that is unsecured and usually involves high fees as well. Repayment of the loan doesn’t necessarily need to be tied to the payday of the individual applying for the loan though they are usually based on the borrower’s payroll and employment records. From application to approval and receipt of funds, the process takes about 15 minutes on average. The typical loan amount is usually between $100 and $1,500.
The birth and history of payday loans is rooted in the financial crisis of the 1980’s. Banking deregulation stemming from this financial crisis caused smaller community banks to close their doors. These smaller banks provided short-term micro-credit. Large banks didn’t because it wasn’t profitable. This deregulation caused a void in the industry with no micro-credit available to consumers. It was from this lack of micro-credit that the payday loan industry was born. The first major payday loan chain, Check Into Cash, was founded by William Alan Jones in 1993 who is often referred to as the “father of the payday loan industry”.
In the United States, payday loans are regulated at the state level and allowable practices vary from state to state. There are also federal regulations via the Dodd-Frank Wall Street Reform and Consumer Protection Act. Regulation targets high fees and high interest rates. Enforcement of federal regulation is handled by the Consumer Financial Protection Bureau, a federal agency. High fees and high interest rates have caused this type of loan to be viewed as predatory. Since the birth of the industry, the number of states which currently allow these loans has dropped significantly. In 2014, 44 states allowed payday loans. Since then, that number has dropped to 27 states.
How Do They Work?
Getting a payday loan at Expert Payday Loans is a very simple process. When applying, the person submitting the loan application provides the lender with their pay stubs, giving the lender information about the applicant’s income and employment. A hard credit pull is used at the time of application to determine eligibility and what the terms of the loan will be. This is done at either a physical location or online and a decision is given within minutes of submitting the application. As far as paying the loan back, the due date is usually two to four weeks out from the date in which the loan was taken and is repaid with one payment.