Cash Day Loan

By: EconomyWatch Content   Date: 4 December 2009

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Most payday loan companies specialize in offering cash day loan in just a few hours. A cash day loan or payday loan is a short-term finance option that is offered on the basis of borrower’s employment details instead of credit rating. The eligibility criterion for cash day loans is very different from the criteria set for conventional loans.

Cash Day Loan: Direct Deposit

A cash day loan may also be called a direct deposit loan because the lender deposits the loan money directly to the borrower’s savings or checking account. The borrower does not have to wait for a loan check to come through mail. The payday lender deposits the money automatically via Electronics Fund Transfer (EFT) system. The transfer of funds via EFT ensures complete security of all information pertaining to the transaction. The transaction takes place on the date that is agreed upon within 24 hours once the loan is approved.

In a direct deposit payday loan, the borrower provides his or her bank details, such as account number and data regarding banking transactions for the last 60 days. This enables the lender to access the borrower’s bank account for transfer of funds at the time of deposit and repayment of the loan amount.

At the time of repayment, the borrower does not have to take any action as the funds are withdrawn automatically on the subsequent payday. The withdrawn amount also includes the interest rate and charges on the loan.

Cash Day Loan: Understanding Finance Charges

A cash day loan typically involves high financing fees. For instance, the interest rates charged in a cash day loan range from 300% to 1,000%. If one takes a loan of $500 for 15 days, the total fee on this loan amount would be around $150. So, the total amount that will get withdrawn from one’s account on the due date will be $650.

Suppose it is difficult to repay the whole loan by the due date, one may request for grace period that comes at additional charges. So, the extension may cost one another $300. In case, one gets the due date extended four times, then the total extension fee would be $600. The total amount to be paid by the next payday would be $1,250. This usually puts the borrower on a debt treadmill. Due to this reason, many finance experts discourage the practice of payday loans.


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