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One of the most common forms of finance available to average people without access to credit is a check cash loan.

A check cash loan or check into cash is a loan in which an un-cashed check is used as collateral. The way a check cash loan works is very simple.

A lender agrees to give a person a loan if the person writes a check for the principal of the loan plus the interest. The lender then gives the borrower the in principal in cash and keeps the check. Then on a certain day the lender cashes the check. The borrower has agreed to have the money to pay off the loan and interest in the account on that day.

The lender makes a profit on the check cash loan by adding a fee or an amount of interest to the principal. The borrower has to write a check for the amount of both the interest and the principal.

How to Get a Check Cash Loan

To get a check cash loan a person will have to have a checking account and a verifiable source of income such as a study job. Check cash lenders are sometimes called payday lenders because they will hold the check until after the borrower’s payday.

Many check cashing stores give check cash loans as well as cashing checks. There are also lenders such as "Check into Cash" and "Money Tree" that specialize in Check Cash Loans. These lenders will cash pay and government benefit checks in addition to making cash loans.

In most cases a check cash lender will require a person to provide verification of income in the form of documents such as banking statements or pay stubs. Some lenders may limit the amount of money a person can borrow based on their income.

Check Cash Loan Technology

The evolution of technology has made a number of new kinds of check cash loan available. Thanks to technology lenders can now make check cash loans without checks available.

 A popular variation on check cash loans is online cash loans. In an online cash loan the borrower provides the lender with her banking details. The lender deposits the funds lent into the borrower’s bank account electronically. In exchange for the loan, the borrower gives the lender permission to withdraw the funds electronically.

Many check loan outlets are now making a similar loan arrangement available to walk in customers. Under such a deal the borrower gives the lender permission to electronically deposit or withdraw funds from their bank account. This enables the borrower to take out and payoff cash loans without writing checks.

Dangers of Check Cash Loans 

There is a serious danger from check cash loans that many people forget about. It is very easy for a person to overdraw their bank account by taking out a check cash loan.

When a person takes out such a loan they give the lender permission to take money out of their bank account. This means that could be no money in the account when other checks or payments come in. The bank will charge an overdraft fee on checks and payments that aren’t covered by the money in the account. Since overdraft fees can be as much as $20-$50 apiece and the bank charges these fees every time a check bounces, it’s possible for several hundred dollars worth of them to accrue in a few days.

This means that anybody who takes out a check cash loan has to be very careful about the checks they write and the payments they make off their checking account. It also means that nobody should get a check cash loan unless they are sure that the funds will be in their account when the loan comes due.