Mortgage Payday Loans

When dealing with unforeseen emergencies requiring cash immediately, sometimes payday loans are one of the only options available. Payday loan companies have sprung up everywhere from strip malls to old vacant buildings, in large cities and in small towns, under the guise of "cash advances" or "quick cash."

Payday loans are small, typically under $1,500 dollars, and need to be paid be within 30 days, although most suggest repayment within 14 days. These loans had a bad stigma due to their large interest rates, and the government began to mandate the allowable interest rate charges, although they are still very high. A typical borrower pays back about $800 for a $300 dollar loan, if they take on about nine repeat loans a year, meaning paying only the fees, and not the principal, with 400 percent interest. There may also be administrative fees added onto the loan amount.

As such, the Center for Responsible Lending cautions that while payday loans are highly visible, readily available, and convenient, they can lead to falling into "financial quicksand." Unfortunately, about 12 million Americans every year are trapped in debt because of payday loans. Some have even resorted to try saving their homes from foreclosure by paying their mortgage with a payday loan, which is unadvisable because homeowners will continue to borrow money that cannot be repaid, leaving them in a greater financial danger.

The loan process itself is fairly simple, typically requiring a form with basic borrower information. Some companies also require bank account or credit card information along with, or instead of, a postdated check. The form can be completed online through payday loan websites or at any of the brick and mortar payday loan providers. Even some banks have started getting into the quick cash industry. Once the agreement is signed, the amount, minus any fees, is received. For someone over 18 with a job and an active bank account, a payday loan can be obtained with few problems, and some websites promise that a person can receive up to $1,500 within an hour.

Payday loans have a high risk because they don’t require any mortgage or security, but companies expect a high return rate by charging at least 15 percent interest for a two-week loan. However, most companies make money because borrowers will take money that they cannot pay off, and they will keep on returning to pay repeated fees on the original amount. If a borrower only pays the fees every two weeks without decreasing the principal, they get stuck in an endless cycle of debt. In addition, if the postdated check bounces, the borrower gets saddled with bounced check fees from both the lender and their bank. Lenders can sometimes become aggressive with their collection, even threatening criminal charges.