Short Term Cash Loan

By: EconomyWatch Content   Date: 1 December 2009

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A short-term cash loan can be chosen as an option when one requires urgent cash. This type of loan is also known as a payday cash loan and requires minimal paperwork. One can get a short-term cash loan approved in a few minutes by applying for it online. In most cases, the money is transferred by the lending institution the same day or the next day into the borrower’s bank account.

Short Term Cash Loan: Methods of Repayment

A loan seeker can repay a short-term cash loan through two methods, as decided in the agreement:

  • A personal check is issued for the lending institution. The amount mentioned in the check is the sum of the principal loan, interest and additional charges, if any. The lending institution processes the check for payment when the repayment period ends.

  • The lending institution can withdraw the amount of loan and interest from the bank account of the borrower on the due date. If enough balance is not available in the account, the lending institution may levy late fees.

If a borrower finds it difficult to repay the full or partial loan amount by the due date, s/he can seek an extension or roll over. However, additional interest charges and fees are levied in this case by the lender. According to a report released in 2006 by the Center for Responsible Lending, the average payday loan borrower makes a payment of $793 for a loan of $325. By continuing to extend the loan, one may get trapped in a vicious circle of debt without any possibility of paying it off.

Short Term Cash Loan: Implementation in the US States

Short-term cash loans are discouraged in many states. They are also considered illegal in some states due to the high interest rates. Payday loan companies require loan seekers to sign an agreement containing terms and conditions regarding loan payment, interest charges and additional fees.

Short term loans are prohibited in the US states of New York, Georgia, New Jersey, North Carolina, Pennsylvania, Maine, Maryland, Massachusetts, West Virginia, Connecticut and Washington, D.C.

It is important for borrowers to not accept terms with a lender who is not ready to disclose the hidden charges in an agreement.


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