Explicit Finance
Direct loans are short-term loans for a hundred dollars up to five hundred dollars obtained direct from a lender. They are sometimes called cash until payday loans since they are obtained on the promise to repay on the next payday. If you suddenly need cash and you don’t get paid for two weeks, you contact the lender (probably online), who agrees to give you advance cash in return for a check for the amount borrowed plus a fee and postdated for your next payday.
When payday comes around, you redeem your check with cash or money order or the direct loans provider may (with your permission) make a direct deposit of it into your bank account. If you can’t redeem it at the time, the lender may arrange with you to rollover the advance; that is, agree to let you repay at a later date. Of course, another fee is then attached. Such a rollover can happen several times, but each time, another fee is payable. Consequently, these loans can become extremely costly.
How much such direct loans end up costing the borrower depends on the amount borrowed and the fee the lender charges (this may vary depending on whether or not you have had dealings with the lender previously). These fees are usually quoted in dollars, which may serve to disguise the high interest rates charged. Expressed as an annual percentage rate, you could end up paying as much as two thousand percent.
If you can’t redeem the check and the direct lender refuses a rollover, or if in any other way you break the agreement to repay, the lender can cash your check. If it bounces, the lender will charge further fees (as will your bank). It also needs to be remembered that writing dud checks is a criminal act.
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