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Payday Loans Glossary – Directory of Lending Terms
Are you confused about how a payday loan works or what the terminology is with many lending phrases or terms? Don’t worry, we can help you better understand all your short term financing questions. There are many direct payday lenders willing to offer you cash. But it doesn’t help if you can’t understand how the loan works! There are so many loan related terms that it’s confusing for most applicants. Use our glossary to better understand the most important online lending related terms. Besides online lending, we also cover fields related to the personal lending industry. Use this directory to find explanations for the most common industry terms about direct payday loans. Keep in mind, these are not definitions you’ll find in a dictionary. These definitions are not meant as legal advice. Information on this site should only be used for informational purposes only.
Payday Loan Terminology
Payday Loan – A payday loan is a small amount of money that’s lent out over time. There is an expectation that the borrower will pay back the full amount with their next paycheck. This form of borrowing has a high interest rate and is often used for short term cash needs.
Interest Rate – The rate charged to a borrower each period for the money lent. The interest rate is in the simplest terms is borrowers total cost to borrow money. As an example, if you had a rate of 12% that means you have a rate of 1% per month. Each state has different rules and regulations for interest rate caps and fees.
Installment Loan – This type of personal loan is usually repaid over a set amount of time with a specific amount of scheduled payments. Most installment loans are issued for more when compared to payday loans. Installment loans are becoming more and more popular. We can attribute this to states cracking down on unscrupulous online companies.
Cash Advance – A cash advance can mean different things. It’s a service offered by credit card companies as a way for consumers to withdraw money from their credit card. A cash advance can also be another name for a payday loan. With this type of cash advance you’re getting a small amount of money lent to you. There’s an expectation to pay it back within a few weeks, usually on your next pay date.
Direct Payday Lender – We use this term a lot all throughout our site. A direct payday lender is a company that actually offers short term financing. This is not a middle-man or lender matching service. They’re the company that’s actually funding your cash advance or personal loan. You can find direct lenders in your state by using our online loan finder service.
Car Title Loan – A quick way for consumers who own a car boat or motorcycle to get cash. A vehicle title loan is different from cash advance or other traditional unsecured loan. With this option you’re putting up a vehicle as collateral to get financing. A car title loan will typically have a high interest rate.
Credit Report – A detailed report that shows a consumer’s credit history. A credit report is often used to determine a borrower’s creditworthiness. Often when they’re applying for installment loans or traditional bank loans. Most direct payday lenders do not pull a consumer’s credit to check a credit score. Instead, they rely on other tools such as Chexsystems or Teletrack to determine a borrower’s creditworthiness. Having Good credit will often lead to more favorable lending terms from a bank or credit union.
Merchant Cash Advance – This type of loan is for businesses and does not apply to individual consumers. Most legitimate cash advance businesses will get a one time payment from a lender in return for a future percentage of sales that comes in. Much like money from direct payday lenders, a fast cash advance will come with a high interest rate. We see most merchant cash advances setup now as a lump sum payment to a business in exchange for certain future revenues. The FTC has recently launched separate investigations into small business financing that cover this form of lending.
Payday Loan Late Fees – These are fees that direct lenders collect from a consumer. The come up when the borrower didn’t pay their loan amount which becomes past due. Some online lenders will give you a grace period of a few days but it depends on the lender. It’s important to pay back your short term back advance on time. Because a lender can start charging late fees once a payday loan come due.
Signature Loan – This is unsecured debt that’s not protected by any guarantor. This also applies to debt that doesn’t have collateral to back it up. While a vehicle or home can back up a loan with collateral, this type of financing has no collateral. When you take out a signature loan you enter into agreement with a creditor and the loan is unsecured. This type of financing is often provided by a credit union or large banking institution.