A Refund Anticipation Loan (RAL) is one in which the short-term loan is secured by the taxpayers expected tax refund and is structured so as to give customers who are waiting for their tax refund quicker access to the same. These can be an alternative to payday loans; however RAL’s have also come under criticism for charging very high interest rates in the form of fees.

• In the US, taxpayers usually apply for a refund anticipation loan by the use of a paid specialized tax preparation service, where a fee is usually charged for the groundwork of the tax return. In the United States the Internal Revenue Service regulations forbid basing this fee on the sum of the anticipated refund. An added fee is generally charged by the service for creating a bank product and creating a short-term bank account. By rule this fee should be the same on both loan and non-loan bank products, and in 2004 the typical fee was thirty tow dollars.
• RALs began with the IRS’s introduction of electronic filing in the mid 1980s as a way to decrease its cost of operation. A tax preparer would, inside twenty four hours of submission, obtain from the Internal Revenue Service verification that the submission had no numerical errors, and that the filer had no liens or aberrant federal student loans. This subsequently meant that there was excellent possibility that the IRS would disburse the refund inside weeks, except for deceitful income reporting. At that point in time the preparer would give the filer a check for the sum of the anticipated refund less a commission.
• In the early years of the 1990’s, misuse of the system started; filers did not correctly report their earnings to increase their refund. Subsequently, and moreover to put off filers from this somewhat extravagant proposal, in 1994 the Internal Revenue Service stopped offering tax preparers a verification that a deposit would take place for a specified amount and that it would start sending refunds directly to taxpayers instead of sending them to banks that made the loan, but not having the wanted results, the confirmations were re-instated the next year.
• According to some experts and expert bodies, these loans are controversial because just like payday loans and title loans, these are high profit yielding and low risk loans for which the target market is the people from low-income groups. A study conducted in 2006 by the NCLC and the Consumer Federation of America discovered that “Based upon the prices for RALs in 2006, a customer can anticipate paying approximately a hundred dollars in order to obtain a Refund Anticipation Loan for the typical refund of approximately $2,150 from a commercial tax preparation chain this year.”
• Even though these loans may extort money from poor people these may be a better choice compared to payday loans which have come under much more criticism compared to RAL loans. However other options such as title loans and borrowing money from friends and family cannot be a bad idea if there are no other options left instead of opting for such costly loan products.

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The Community Financial Services Association of America is an entity that is a trade organization that represents the interests of payday lending industry. Since payday lending has come under a lot of criticism the Community Financial Services Association of America (CFSA) has initiated a campaign that aims to educate as well as advertise about payday lending.

• Payday loans are usually short term loans with a very high interest rate that can go up to a thousand percent. Furthermore such loans can be rolled over or extended for a period of time but this requires some hefty fees. These fees may add up to the amount that is owed by the borrower over time. Typically payday loans are given or sought out by low-income groups and these usually do not have the resources of any other type of credit.
• Since payday loans do not require a credit check and does not take into consideration the credit history of the borrower lenders charge a high interest rate. Payday loans have come under criticism by the Department of Defense in the United States and it has deemed payday loans to be predatory lending. Such loans if forwarded to defense personnel have an interest rate cap and some states have completely outlawed these loans.
• According to the website of Community Financial Services Association of America, it was established in 1999 “to ensure consumer confidence in, and long-term success of, the payday advance industry—one of the fastest-growing financial service industries in the United States.” According to CFSA its mission is to encourage legislation and parameters that guard consumers, while safeguarding their access to short-term credit alternatives, and to sustain and promote accountable industry practices.
• CFSA works aggressively at the home, state and countrywide levels to inform legislators and regulating bodies about the function of payday loans in the broader financial service field.  The majority of states have thought about and passed balanced and conscientious legislation, with thirty-four states presently regulating payday loans and related services. In the remaining states payday lending is completely illegal.
• According to CFSA, to assist in self-governing the membership and support accountable industry practices, CFSA initiated a set of compulsory “Best Practices” in early 2000.  To be a member of CFSA, a payday advance supplier should abide by these practices.  Amongst the Best Practices are – necessity to exhibit fees in large letters on placards or posters in all store locations and give clients the choice of an Extended Payment Plan, at no extra fees, if they are incapable of repaying their loan when it becomes due. The website of the CFSA which is CFSA.net can provide more detailed information on how payday loans are regulated and some other features of the same.

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Payday loans which are also called paycheck advances, cash advance loans, or check advance loans are short term loans that are offered for approximately one to four weeks. The name payday loan is the result of people borrowing on the promise of a payback on their payday. However, these loans are usually last-resort loans for people who have run out of other options and these loans have numerous disadvantages. Here are some drawbacks of payday loans which are notorious for their nefarious and predatory lending practices.

• Interest rates
  The interest rates on payday loans are very high and can range from 300% to a staggering 1000%. Compared to other sources of credit, these payday loans charge almost ten times the interest charged by banks and credit cards. Therefore the interest rate on payday loans is the biggest drawback for a borrower who may end up paying a lot more than he or she borrowed.
• Roll-over trap
  Payday loans are made or structured in such a manner that if a person does not have enough to payback on a predetermined date then the loan can be rolled over or extended. This means that not only is the borrower paying a large interest rate over a longer period; he or she also has to shell out for fees which are charged for rolling over the loan. Therefore rolling over of a payday loan is not advisable.
• Predatory lending
  Payday loans have been called as predatory by the Department of Defense in the United States and a cap or limit has been imposed on the interest charged on payday loans which are forwarded to defense personnel. These loans are generally offered or sought out by people who do not have any other source of credit and are trying to make ends meet. Payday lenders take advantage of this financial weakness in order to exploit people by trapping them in a vicious debt cycle.
• Aggressive collection practices
• Payday lenders usually employ cunning and aggressive collection practices which may harm you financially in an irrecoverable manner. Sometimes payday lenders require the borrower to write a postdated check in order to enforce payment on that day. The check may bounce if funds are insufficient and the borrower may end up paying an overdraft fee or some other contrived charges by the payday lender. Therefore it is advisable to look for other sources for short term financing instead of opting for payday loans.

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This is a continuation of the third part of the glossary of terms related to payday loans in particular. This may help you in filtering the jargon out of the subject matter and understand the terminology used in payday loans. Hope you find this part of the compilation as useful as the previous one.

• Prepaid debit card: Such type of card allows customers to manage their spending by setting up a credit line that matches to the money in their account. This assists in restoring their credit. Sanction is certain, and there are no interest charges.
• Prepayment penalty: This is the fee that lenders charge borrowers who shell out a fraction of or their complete loan before the maturity date.
• Principal: Principle can be defined as the loan amount that has been borrowed by the consumer.
• Rollover: Rollovers are also referred to as extensions; they permit borrowers to renovate their cash advances. Rollovers charge a supplementary fee to extend payback to the subsequent payday. Numerous states have passed laws that limit the number of rollovers that lenders can grant in a specific time period.
• Truth in Lending Act (TILA): This federal legislation necessitates lucid and noticeable disclosures to borrowers about loan costs and terms and conditions.
• Unsecured loans: Unsecured loans can be defined as personal loans given for amounts ranging from $500 to $250,000. They do not need borrowers to pledge their residence or assets as collateral. They entail fewer formalities and are accepted quicker compared to conventional credit. Borrowers have to give proof of earnings and generally verification of service or employment in such cases.

If you have any more points or facts or terms to share, please feel free to leave a comment.

This is a continuation of the second part of the glossary of terms related to payday loans. Hope you find it beneficial in understanding the subject and perhaps save money and avoid personal debt through awareness and knowledge of the jargon and technicalities involved in payday lending.

• Online payday loan: This sort of loan is obtainable on the internet at any time. No credit check is necessary for an online payday loan. It also makes it feasible for customers to effortlessly, rapidly and securely apply from the comfort of their residences. For qualifying an online payday loan, the applicants must meet the following requirements: You must be a citizen of the United States; you should have an occupation or being paid regular benefits of some type such as social security or a pension; you must have a legitimate checking or savings account (some lenders need the account to have been dynamic for no less than three months); you must have stable earnings (no less than $1,000 per month) and you have to be at least 18 years old.
• Over-the-limit fees: These are the fees that are charged for every month that their balance surpasses their loan maximum value, borrowers are charged an over the limit charge. It generally ranges from thirty to forty dollars.
• Payday loan quote: A payday loan quote can be defined as a complimentary and safe online site where you can evaluate payday loan rates from a number of lenders.
• Payday loans: (which are also referred to as fax-less, deferred deposit, fast cash, cash advance, payday advances, quick loans and online payday loans) These customer loans are unsecured, temporary (usually two weeks or less), loans ranging usually from a hundred to a thousand dollars. Payday loans can be acquired through the Internet, via fax or phone, or at a brick and mortar store. No credit check is required or done on such type of loans.
• Payday loan calculator: A Payday loan calculator is one which is an online calculator permits customers to compute the total interest, annual percentage rate (APR), and entire settlement quantity of a payday loan.
• Predatory lending: Predatory lending can be defined as lending practices where there is a failure to reveal loan terms and cost and/or the misleading persuasion of potential borrowers to approve to abusive and unfair loan terms, for instance unjustly high fees.

If you have any other comment or term to add to this glossary, please feel free to leave a comment.

This is the continuation of the first part of the glossary of terms related to payday loans. Hope you find it useful if and when you decide to choose such type of loans.

• Credit reporting agency (CRA): They assemble financial data about borrowers. The three chief credit reporting organizations in the United States are Equifax, TransUnion, and Experian.
• Credit score: A credit score is a three-digit number from 300 to 900, which is a measure of a borrower’s creditworthiness based on payment record. A credit score is generally categorized as excellent, good, fair, or poor.
• Creditworthiness: This is a borrower’s readiness, probability and capability to pay back a loan or credit given to that person.
• Debt Management Company: Debt management companies bargain with creditors to lessen interest rates and monthly costs. They usually have other counseling services to assist their customers work through their monetary issues.
• Default: A default is done when a borrower fails to make well-timed payments on their loan and finally discontinues paying completely.
• Deferred deposit lending: In such loan contracts, a lender provides a borrower with a cash advance. The borrower, obtains a postdated check, and holds it for deposit on the day the loan is outstanding. This is a temporary loan ranging anywhere from one to two weeks.
• Direct deposit: A direct deposit is nothing but electronically depositing funds into a borrower’s account.
• Fee: A fee can be defined as a charge that payday lenders assess on funds that have been borrowed.
• Finance charge: The entire price of credit. It comprises of processing fees, service charges, as well as interest.
• Interest: Interest can be defined as a percentage rate that a borrower shells out in order to borrow funds.
• Maturity date: Maturity date is the final due date for the principal and finance charges on a loan.
• No credit check personal loan: No credit check personal loan is a sort of loan does not need a credit check to be performed in order to obtain a loan.
• No fax payday loan (faxless payday loan): This can be defined as temporary cash advance which tides borrowers over to their next payday, can be acquired incredibly rapidly.  Individuals can apply for and be given a no fax payday loan online or by calling. There is no need to fax their bank account and employment data to the lender in such loans.

If you have any more points or terms to share regarding payday loans, please feel free to leave a comment.

Payday loans have come under a lot of criticism in the United States and in many countries because of their predatory lending practices and other shady acts that are detrimental to people who are in the low income group and can only rely on payday loans for their credit needs. Here is a compilation of glossary of terms related to payday loans which may help you in understanding the terminology in a better manner and avoid getting trapped in a debt cycle or personal debt.

• Annual percentage rate (APR): This rate corresponds to the yearly cost of credit charged on a loan. The Federal Truth in Lending Act necessitates payday lenders to reveal the APR to potential borrowers.
• Bad credit: Bad credit can also be referred to as a low FICO score or a bad credit rating. This typically results from a borrower’s behind schedule payments, non-payment and other credit destructive dealings. It’s hard to acquire loans with bad credit.
• Bankruptcy: This can be defined as a federal court proceeding in which debts are wiped out (Chapter 7) or restructured for the reason of repaying them (Chapter 11).
• Cash advance loan: This can be defined as a short-term loan which is usually somewhere around a hundred to a thousand Dollars. It links the space until the subsequent payday.
• Collateral: Collateral can be defined as assets such as a vehicle or residence that are given as a security to a creditor as a reassurance of debt settlement. They typically have a comparable value as the debt itself.  If the borrower does not pay back, the lender can sell off the property to satisfy the debt.
• Community Financial Services Association of America (CFSA): This national organization guarantees that the payday loan industry function in a conscientious way. It gives some comfort to borrowers that they can acquire genuine short-term loans.
• Credit check: A credit check can be loosely defined as detailed credit reports from one or more than a number of the three principal credit bureaus (Experian, TransUnion, and Equifax). It encloses data on the broad creditworthiness of the probable borrower.
• Credit history: Credit history is a report that comprises of information on a borrower’s loan repayment activities, accessible credit lines and performance as far as credit is concerned.
• Credit report: A credit report is a review of a borrower’s credit record which comprises of outstanding debts, obtainable credit, credit inquiries, and public records for example court judgments or bankruptcy filings.

If you have any other points or terms related to payday loans please feel free to leave a comment.

Predatory lending is a very broad concept but can be defined as the practice of lending in a fraudulent and abusive manner. This means that lenders take advantage of people who are in need of finances and have bad credit history and often become the “prey”. Predatory lending practices are usually prevalent among short term lending contracts; however it can also be found in many long term advances given by lenders.

• Payday loans have come under immense criticism for this particular reason as well. Predatory lending is possible in payday loans since the borrower is in dire need of money and has no other sources of taking out a loan. Sometimes the lenders deliberately keep the customer in the dark about the actual interest rates. Some lenders may even charge as much as 100% interest over the period of the loan.
• Payday loans have been criticized by the United States military as being “predatory” in nature. Since the military has many recruits who fall in the lower income group, payday loans can bring with them financial ruin. Many people have slipped into deep debt due to payday loans and therefore the United States military has capped the interest rate that can be charged for military personnel when they avail of the facility of payday loans.
• The main reason for payday loans to be deemed as predatory by many people is that they seem to exploit those who are facing financial hardship. The classic cliché of the rich getting richer and the poor getting poorer is usually true in cases when it comes to payday loans. Payday loans can sometimes trap the borrower in a “debt cycle” in which the interest goes on accruing and can only be relieved if the whole amount is paid back.
• Payday loans are also aggressively marketed especially in the United States to poor unsuspecting or uneducated people. These individuals often have no idea of other sources of getting hold of finances and thus fall prey to predatory lenders. Moreover lower income groups do not enjoy the credit offered through credit cards and other financial instruments due to their dilapidated financial condition.
• It is always advisable to look for other sources for borrowing money if you are in need of quick cash in short term. However it cannot be denied that there are lenders who offer payday loans without any malice and can be beneficial. However the fact remains that payday loans and credit card debt have ruined many people’s finances and lives. It would be financially prudent to read up about such loans and take the advice of a professional or agent before opting for any type of payday loan.

If you have any additional facts or points regarding this topic please feel free to leave a comment.