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How “Payday” Loans Work

Just what exactly IS a payday loan?

The answer is simple: It’s more accurate to call it a small short-term unsecured loan, designed to get a customer through a short, tight-money patch. It’s usually less than $500, and can be for anywhere between 3 to 31 days. After all, even the most organized person can have an emergency–a medical crisis, a car repair, or utility bill–and need quick access to cash, or just something to tide them over until payday.

The loan is not necessarily tied to a customer’s pay date, although frequently customers choose to repay their loans once they get their paychecks. These advance loans (like most loans) do rely on the consumer having previous payroll and employment records.

What does a customer need to provide in order to secure a payday loan? For a Microcredit loan from PayDayHawaii, they must be a resident of Hawaii. The customer will need to bring with them: their current government photo ID, their most recent pay stub or benefit statement, their text-capable telephone, or their most recent telephone bill.

What if the customer wants to extend the loan past its due date—“rollover” the loan? Hawaii law does not allow any client to rollover the transaction principle by paying the transaction fee. Even if it were legal, this practice would very much be discouraged. In the long run, it does not really help the customer—in fact, it only gets them into a larger problem.

Can a customer with another short-term loan outstanding also get a payday loan? PayDayHawaii will not extend credit to anyone with an existing payday loan, or similar 32-day-or-less credit transaction, from any storefront, online lender, bank or credit union.

Can a customer ever have multiple loans? PayDayHawaii will never allow multiple transactions that occur at the same time. It is possible for a customer to take multiple, separate, loans spaced throughout the year—just not more than one at a time. PayDayHawaii voluntarily provides a payment plan to any individual after four consecutive transactions to discourage repeat borrowing.

Are there additional fees? PayDayHawaii does not charge upfront fees or additional excessive fees if a client has insufficient funds to pay the transaction in full by their due date.

PayDayHawaii’s policies, and the laws of the state of Hawaii, are not necessarily true in other states. Each state has its own rules and restrictions.

PayDayHawaii provides many financial services to Hawaii’s working families, from bill-paying services to tax planning and filing, from check cashing to U.S.P.S postal services, from money transfers to short-term loans. We care about our customers: They are regular people who are unwilling or unable to utilize traditional banking services, or find it more convenient to take care of their financial needs in one place, with the same person. Many of our customers live paycheck to paycheck, and don’t have the luxury of a 401-k, an understanding employer, a trust fund, or family members with money to loan.

We believe in financial education that regular, hardworking people can understand, and that applies to their life situations. Not only does PayDayHawaii have a financial education blog, but we also post appropriate informational topics on our website: Be a Responsible Borrower.

Payday Loans in the News:
New rules proposed by the government would change short-term credit for everyone, making it harder—sometimes impossible—for you, the customers, to get the money you need. These new rules would apply to PayDayHawaii’s Micro-Credit Advance, payday advances, and other forms of short-term credit.
What you can do:
Act now to protect your financial freedom by signing the petition protesting these proposed regulations at:

Want more information on short-term loans, payday loans, Micro-Credit Advance, or the petition? Stop by any of our PayDayHawaii locations, and we’ll be happy to answer your questions!

This entry was posted in Financial Education, Selecting and Using Credit, Using Financial Services. Bookmark the permalink.

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