So, what exactly is a payday loan? It is generally a small,
unsecured loan that is short term that is linked or not linked to the person’s
payday. Sometimes these types of loans are also called cash advances. These
types of loans rely solely on the person having proof of employment.
The payday loan process will involve the lender giving the
person in need of the loan a short term loan that is unsecured and is to be
paid back by their next payday. Usually verification of employment or some
source of income such as paycheck stubs or bank statements will be required in
order for the person to qualify. However, it completely depends upon the
company that they are trying to get the loan from.
How it usually works is that the person that needs the loan
will go to a payday lending company and ask for a small cash advance and
generally the repayment of the loan will be expected in full when the person
gets their next paycheck. The person who is asking for the loan will usually be
asked to write a postdated check that is given to the lender in the amount of
the loan plus whatever the lending fees are.
When the date of the payday loan arrives, the person who
borrowed the money is then expected to come back to the company to pay back the
loan in person. If they do not repay the loan in person, the company then can
take that postdated check and cash it. Then, if their bank account has
insufficient funds to cover the check, they will then be charged for a bounced
check at their bank along with all the costs of the entire loan. There also may
be additional fees added on as the result of their inability to repay the loan.