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Online Payday Loans what are they?

A payday loan is a loan granted over a short period of time, which is usually small in volume, and which is provided in order to keep the borrower's finances stable between pay days. The procedure has become extremely popular in recent years, as people's finances have suffered due to the global economic crisis.

Another name for payday loans - more popular in the United States - is a paycheck advance. The loans are additionally known as cash advances, although a cash advance can also mean something different: cash granted against an existing line of credit, such as a credit card. Payday loans are regulated by different laws in each country, and in America legislation varies from state to state.

Some countries are extremely strict on the payday loan business, and control the nominal annual percentage rate (APR) which lenders are allowed to charge; some jurisdictions even ban the process altogether, but others are much more lax. Because payday loans are paid back over a short period of time, the values of APR and effective annual rate (EAR) can vary greatly, because APR does not include compounding.

In order to get their loans, borrowers must visit a lending shop, and agree to return the sum upon receipt of their next salary (this usually means two weeks after the loan is granted). Payday loans are normally charged at between 15 and 30 percent of the amount borrowed for this two week period - this equates to APRs of between 390 and 780. A post-dated check must be written by the borrower on the day upon which they receive the loan. On the date on which the sum is due to be returned, the borrower must repay the loan in the store in which he took it out. If he does not appear in person to pay back the money, the shop will cash his check in his absence.

If the borrower does not have sufficient funds in his account on the day the loan is due to be paid back, his bank may impose a fee on him on top of the sum of the loan. The sum of the loan may in turn increase due to the failure of the borrower to pay. But for those who cannot pay the loan back when requested, the national trade association is obliged to provide them with a free payment plan. In America - Washington being one example - these payment plans are mandatory.

Loan providers require that the borrower brings pay slips as proof that they have a regular income. Bank statements must also be shown. Other criteria may be enforced in order to ensure that problems will not ensue, depending on the location and nature of the company.

Payday loans are also available online. They are advertised by email campaigns, in search engines and using advertisements. Instead of going to a shop, the borrower instead fills in an application form with information about their personal circumstances, bank details, employment details and social security number. Then, the paperwork is faxed and the loan is paid into the borrower's bank account directly. On his next pay day, the sum, plus the additional fees, is automatically withdrawn from the same account.