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Payday Loan Terminology
By: Max Hunter iSnare Expert Author
Sometimes, the terms associated with payday loans, or any other loans for that
matter, can be confusing and difficult to interpret. The purpose of this
directory is to help assure that anyone who is shopping for a payday loan has
the right tools to cut through the rhetoric and come away with a clear
understanding of what each associated term means.
Annual Percentage Rate (APR) – The annual percentage rate is defined as the cost
of credit to the borrower in relation to the amount borrowed, expressed as a
yearly rate. On mortgage loans, for example, lenders are required to disclose
the APR, which also includes other loan costs such as points and loan fees that
would be paid by the borrower.
Payday loans – A payday loan is a short-term loan, advanced for two weeks or a
month, until an individual’s next payday. It is also called a cash advance, a
check advance, a payday advance, a cash loan, etc.
Payday loans online – Payday loans online are those which are transacted
completedly through electronic means. In other words, the applicant doesn’t have
to go in to the office or the bank to apply for the loan, but can do so from his
or her own computer. Online loans are also referred to as online payday
services.
Loan fees – The amount the lender is allowed to charge for the borrower’s
privilege of receiving the loan. Loan fees can be flat fees (i.e., $15 per $100
borrowed) or a percentage rate (such as 6.5% of the total borrowed). In any
case, the loan fees are tacked on to the amount borrowed, so that if a person
borrows $100 at a flat rate of $15 per $100 borrowed, the total amount due to
the lender on the due date would be $115.
No faxing – When payday loan offers first began to appear on the Internet, part
of the application process was faxing documents like paystubs, checking account
statements, etc. to the lender. In some cases, when the loan was approved, the
borrower received a check by fax, as well. Today the loan companies are
advertising ‘no faxing’ as an additional incentive to borrow from their company,
since everything is done through a quick Internet application and no documents
have to be faxed, making the turnaround time much less.
Amount financed – The amount financed is not just the amount borrowed. A
borrower may, for example, request and receive $100 from the lender. However,
the amount financed includes both the amount borrowed and the costs charged by
the lender for the loan. If, for example, the lender charged 10% for a 14-day
$100 loan, the total amount due back to the lender in two weeks would be $110 –
or the amount financed.
Finance charges – Finance charges are similar to loan fees – the amount of money
that is charged to the buyer for use of the lender’s money for a specified
period of time. The finance charges may be expressed as a flat rate (i.e. $15
per $100 borrowed), or as a percentage rate (i.e. 10% of the total amount
received by the borrower).
Total payment due lender – Total payment due lender is another term for the
amount financed. It includes both the amount borrowed plus any finance charges
or loan fees.
Secured loan – A secured loan is one for which the borrower signs over title to
some sort of collaterol that the lender can collect and use as repayment if the
borrower fails to pay off the loan in the specified time frame. Title loans are
secured loans. The borrower turns over his or her car title in exchange for
receiving the loan. If he or she is unable to pay back the loan, plus loan fees,
within the designated period of time, the lending company can seize the
borrower’s car and sell it to pay off the loan.
Unsecured loan – An unsecured loan is one for which no collaterol (property of
one kind or another) is required. A payday loan is an unsecured loan that is
guaranteed only by either a post-dated check issued on the borrower’s bank
account and dated for his or her next payday, or by an authorization to withdraw
the amount financed from the borrower’s checking or savings account on a
specific day.
Bad credit loan/bad credit cash loan – A bad credit loan is just another name
for a payday loan or cash advance. Generally, these types of loans are available
without a credit check, so that even individuals with bad credit, or no credit,
can qualify.
Roll over – When a loan is ‘rolled over’ that means it is refinanced for another
period time such as another two weeks or an additional month. The lender usually
charges the same fee to roll the loan over as is charged to obtain it in the
first place. For example, if the borrower agreed to pay $15 in loan fees for a
$100 loan for two weeks and needs to have an additional two weeks to make a full
repayment, the lender would charge an additional $15 to carry the loan for the
additional period of time.
Licensed lenders – Some payday lenders are licensed to operate in the state
where they are doing business and some are not. As a precautionary measure, the
borrower should make sure the lender is licensed.
About the Author:
Max Hunter is the author of many credit related articles. If you are looking for help with Payday loan or any type of faxless loans please visit us at http://www.PaydayLoanChoice.com |
