Quick Loans: Cash Advance & Payday Loans

handing out moneyWhat is a cash advance loan, or payday loan?

A cash advance loan, sometimes referred to as a payday loan or simply called a personal loan, is a popular type of loan used by many consumers to obtain short-term financing for important needs.

Who uses them?

Many different types of people use cash advance loans. The types of people who most commonly use these loans are working people who find themselves a bit “short” of cash between paydays. The typical borrower is a hard-wording, middle-class consumer with a short-term need for credit.

Any person who is employed, or working regularly under contract, may be a candidate to borrow money through a cash advance loan. In particular, workers in many professions and occupations such as the military services, construction trades, trucking, retail and seasonal employment, all benefit from payday loans.

The ideal borrower is a person who works steadily and receives a regular income, yet who lives generally within his or her means. For such a borrower, the cash from a payday loan can be a lifesaver in case of financial emergency. Once the short-term need has been met, the borrower pays off the loan on the next payday and the loan has served its purpose well.

When does someone need a cash advance loan?

Payday loans are often used when the borrower encounters an emergency expense and must pay it immediately, without waiting for the next payday. For example, common reasons for requesting a personal loan include car repairs, such as towing charges, major automotive work to engine, transmission, and electrical systems. In many cases, a fast loan presents the only means of restoring lost transportation and allowing a worker to travel to the job to continue to earn money.

Other common reasons why people seek cash advance loans include home repairs, especially repairs relating to water leaks or security issues such as fixing broken doors and windows. Sometimes, these loans are used to improve properties in advance of special occasions. For example, a consumer may wish to borrow money to paint or repair a home before a planned wedding or other important social event.

Where are they available?

In the United States, payday loans are currently generally available in the other 36 states, but are not available in the following 14 states—

New Hampshire
New Jersey
New York
North Carolina
West Virginia

In some states, including some of the above, there may be no direct legal prohibitions against payday lending, yet there are other restrictions on interest rates and terms which make payday lending impractical for lenders in those states.

How can a person get a cash advance loan?

People rely on payday loans because they are quick and easy to obtain. Anyone who needs a loan or cash advance can apply directly to a good payday lender through one of the following two sources: Retail-based (bricks-and-mortar) lending and Internet-based lending.

Retail-based payday lending

To secure a loan, the prospective borrower must visit a retail payday lending store location in person. This is a physical (bricks-and-mortar) location, often strategically located within another local financial-services outlet such as a money-transfer company or pawn shop. The advantage of retail-based payday loans is that the lender maintains a local office where the borrower can meet with staff face-to-face.

During the process of applying for a loan at the retail store, the applicant will be asked to provide proof of identity and proof of employment and income, such as pay stubs or bank statements. Depending upon the underwriting requirements of the particular payday lender, the applicant may also be asked to show other proof of financial capability and possibly other documents such as property leases or sales contracts. Finally, some cash advance lenders ask for personal and family references as well.

After providing the information required for underwriting, the loan application is reviewed by the retail loan officer for completeness, and is then passed through an underwriting process, which involves verifying the applicant’s employment and income, before being sent to the manager for approval.

Once the borrower’s loan has been approved, often within a few minutes, the store’s cashier disburses the loan to the borrower in the form of cash, and the borrower is free to use the loan proceeds however he or she wishes. The speed and flexibility of this type of loan are the main reasons why borrowers prefer it.

Usually, the manner of repaying a loan from a retail payday lender is that the borrower completes and signs a post-dated check for the full amount of the loan plus the lending fees, and leaves that check with the lender. When the loan has matured, usually in two weeks, the borrower either returns to the retail store to repay the loan in full, or else the borrower’s post-dated check is cashed or deposited by the payday lender and thus the borrower’s loan is repaid.

Internet-based payday lending

Best of all, payday loans are now widely available online and are therefore accessible to more people. Usually, the prospective borrower completes the application online; sometimes the borrower is asked to fax a completed, signed application to the cash advance lender. The information required for the application will include proof of income and identity, and also personal financial information such as Social Security numbers, bank account information, and employer information.

Following the underwriting process and upon approval of the cash advance loan, the loan proceeds are generally disbursed directly into the borrower’s checking account using wire transfer or similar means. With the funds then available in his or her account the borrower can write checks or receive a cash withdrawal from the checking account. For repayment of the loan, the lender electronically withdraws the loan amount, including fees, on the borrower’s next payday.

In summary, the great popularity of cash advance or payday loans is due to the fact that the cash advance loan can be received very quickly, empowering the borrower to resolve financial pressures much more rapidly than through other means. Because these loans can be disbursed instantly, they will continue to be very appealing to consumers.

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