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How Do Payday Loans Work?

How Do Payday Loans Work?

When the financial stresses of life come down on you hard, payday loans can be a lifesaver. Make certain that you know the fees up front when it comes to payday loans. At Payday America, we have no hidden fees and even the debit fee of $4.95 can be waived. Call the Payday America store near you to find out how! Find a store on our website at:

We’re taking a deep dive into the world of payday loans, and we’re answering any questions you have about them. From how payday loans work, to what happens if you can’t pay to alternatives to payday loans.

Payday loans, also known as cash advance loans, are short-term cash loans based on electronic access to the borrower’s bank account

What you need at Payday America:

  • State issued photo ID (must be valid and not expired)
  • Social Security Card or 1099
  • VOID check or other form of bank proof of routing and account number
  • Your two most recent and consecutive paystubs or current year’s award letter for any benefits received
  • Current 30-day banking transaction history

How Do Payday Loans Work?

Loan amounts for payday loans vary from $50 to $2,500 , depending on the law in your state. If approved for the loan, you receive the cash on the spot, or it is deposited into your bank account within two days. The borrower could also authorize the lender to electronically debit the funds from their bank account.

How are Payday Loans Paid Back?

The name says it all. The payday loan needs to be paid back on the borrower’s next payday whether weekly, biweekly, or monthly, most commonly two to four weeks. Lenders can charge interest of $15 to $30 (depending on your state) for every $100 borrowed. That is also due on the borrower’s next payday. However, some lenders offer longer-term payday installment loans. For this type of loan, you must authorize the lender to electronically withdraw multiple payments from your bank account.

What Happens If Payday Loans Are Not Paid?

Payday loans are expected to be repaid on the borrower’s next payday. If this does not happen, lenders have put in place measures to protect their interests. Prior to receiving the cash, borrowers are required to either write a post-dated check for the lump sum of the loan, including fees and interest or provide bank account information. If the loan is not paid back on time and no other arrangements have been made with the lender, the lender can cash your check or electronically debit your bank account for the full amount of the loan, including fees and interest.

Another option is for the borrower to ask the lender to roll over the loan. That means that the borrower would pay whatever fees are due, and the lender extends the loan. However, this can only be approved if it is allowable in your state. If the rollover is approved, the interest and finance charges on the loan grow.

What Are The Requirements for Getting a Payday Loan?

To get approval for a payday loan, the borrower needs to have an active bank account, a regular source of income, and identification. No credit check is required. That can be good for someone who does not have a good credit history and is unable to acquire a loan by any other means. But it may not be a good fit for someone who is financially strapped and will find it hard to repay the loan. Since there is no credit check and no questions to determine what you will be able to repay, the onus is on the borrower to be able to repay the loan, regardless of their financial status.

What State Regulations Are in Place for Payday Loans?

Each state has its own regulations when it comes to payday loans. Some states prohibit payday loans, and service members and their families are protected by certain laws. If you’re wondering what the regulations for payday loans are in your state, check here.

Where Can I Get a Payday Loan?

Payday loans are made by payday loan stores or at stores that sell other financial services, like check cashing, title loans, rent-to-own, and pawn stores, all depending on the requirements in your state.

What Are the Advantages of a Payday Loan?

The main advantage of a payday loan is that it is an easy way to get access to cash that you need immediately. Payday loans can be a lifesaver to consumers who are facing a cash emergency. They may need cash for groceries or to keep the foreclosure sign off the doors. In any case, payday loans can be helpful when you need cash fast. They are especially helpful to those whose personal credit would hinder them from getting a loan from any other means.

Short Terms

Payday loans are short-term loans, which means the lump sum, including fees and interest, must be repaid on the due date of the loan. In essence, this may only create a temporary fix for people who live paycheck to paycheck.

Additional Fees

If the borrower is not able to repay the loan within the established timeline, they may get hit with additional fees. If the borrower gets approved to roll over the debt and pay in installments, additional fees will continue to add up. Additional fees can include:

Charge for Insufficient Funds

At the time you receive the cash for the loan, the lender will require your bank account information. When they try to collect their money and the funds aren’t there, you will be charged an additional fee, your bank will charge you with insufficient funds and the lender may also.

Late Fees or Return-Payment Fees

If you don’t repay on time, the lender can charge you with late fees, or a return payment fee if the funds were not available through your bank when they tried to collect.

Rollover Fees

If you are not able to repay your loan on your next payday and request to roll over the debt, the lender can charge you additional fees with each installment payment you make on the loan.

Won’t Improve Your Credit

If your credit is not good, don’t expect the approved payday loan to help boost your credit score. Even if you do pay the loan back on time, payday lenders usually don’t report your payment history to the credit bureaus.

Alternatives to Payday Loans

Credit Counseling

Nonprofit credit counseling agencies offer free advice on how to set up an affordable monthly budget that will help you to eliminate your debt. They also work with your creditors for debt management plans and debt settlement. Others offer free tools for better budgeting and saving like Dave Ramsey Solutions- You can also find a lot of helpful information on State and Federal websites: MN Dept of Commerce Credit Counseling:,

Wisconsin Dept of Financial Institutions- Financial Wellness:, Iowa State Resource:

Debt Management Plans

Credit counseling agencies also offer a service to reduce credit card debt through debt management plans. For a monthly fee, the agency works with your creditors to lower the interest rates you pay. The agency pays the creditors through the monthly payments you make to the agency. This type of plan usually takes three to five years to pay off your debt.

Debt Settlement

If you’re trying to keep pace with unsecured debt (credit cards, hospital bills, personal loans), this may be the reason why you need to resort to payday loans. Debt settlement is when the agency negotiates with your creditors to pay less than what you owe, so you have less debt to pay back. The downside to this is it will impact your credit report.

Payday America

Payday America is another alternative when you want to avoid the high-interest fees of a regular payday loan, or the loans offered form Internet-only providers who charge very high rates. Payday America represents the highest quality standards to ensure our customer service is second to none. We offer loans that are less expensive and more practical than a regular payday loan. Our loans are affordable, and nearly 100% of our loans are repaid, unlike payday loans where many consumers are not able to pay back.

Payday America offers competitive rates with low fees and NO hidden fees. Our stores are located throughout Minnesota, and our services are available online for residents of Wisconsin.

If you need money quickly, that’s affordable to pay back with low rates and NO hidden fees, contact us, call us at 1-866-646-1777 or apply today!

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Loans are subject to Payday America Inc's, terms, conditions and underwriting requirements. Credit approval is not guaranteed and not everyone is eligible for a loan or for a specific amount. Complete disclosure of APR, fees, and payment terms are available upon request by calling 1-952-277-4135 or by visiting a Payday America Inc. store location. This is not an offer to lend and should not be deemed an obligation to do so. Minnesota loans are made under Minnesota Statute Section 47.59. Loans are not available in any other states.