1-hour Payday Loans: A Breakdown

1-hour payday loans are the fastest type of payday loans currently available. As with all other payday loans, they are extremely accessible as very few people are not eligible for one. Because of this fact, they are historically popular in poor neighborhoods and with low-income families, usually those living paycheck to paycheck and for one reason or another, have an unexpected expense they have to pay for, and quickly. The difference between 1-hour payday loans and other payday loans is the speed of the turnaround of your application; processing of your application and subsequent approval may be completed within one hour. With 1-hour payday loans, you should be able to access the cash advance by the end of the following business day, at the latest. Many companies do offer the option of wiring the money directly and immediately to your bank, but not without charging additional fees. Theoretically, and depending on the activeness of the company you are dealing with, you could apply for the loan and have it in an hour.

This seems like a great way to get the money you need, and fast. However, we must consider the full picture before we buy the painting. The biggest, and sometimes ineffectual drawback of payday loans is their extremely high interest rate. In fact, many states have taken measures to ban payday loans completely as they are in violation of usury laws. In North Carolina, for example, it is against state statures to pay above a 36% APR; the usual interest rates of payday loans is 15-30% which roughly translates to 390%-780% APR, well above the illegal 36%.

Ergo, payday loans are illegal in North Carolina. But this doesn’t mean North Carolinians can’t and don’t access them. Though illegal in NC, these types of loans can still originate in other states not employing as involved usury laws. Because the majority of these loan companies operate primarily (if not solely) online, access to these loans is still possible. Further, payday loan companies are strategic with their wording; instead of calling it an ‘interest rate’, they may refer to it as a ‘financial fee’. This ‘financial fee’ is still large, averaging $25 for a borrowed $100 and ranging from $10-$30. So, while these personal lenders have been supervised and regulated by the Federal government since 1955 and do operate under strict guidelines set by the FDIC, it is evident that many payday lending companies can and do utilize certain loopholes in a similar fashion in order to capitalize on their loan to you.

The ‘1-hour’ facet of the cash advance loan is named for the third party creditor’s ability to finish processing the paperwork (usually online) of your loan application within one hour. Given, this is an impressive feat; one must realize the components of what things actually need to be processed. Most payday loan companies require minimal information compared to bigger, more credible loaning establishments. Payday companies will usually only ask, in addition to basic personal contact information, your social security number, bank account number, employer information, as well as a copy of your recent pay stub and bank statement. The last two may be omitted from what they ask you to provide if the loan is tagged as “faxless”. The ‘payday loan’ facet is descriptive of all payday loans. It indicates a small loan is granted, usually in quantities ranging from $100-$1500 (often in $100 intervals), and is to be repaid at your next payday, hence ‘payday’ loan. Because many of the borrowers are paid bi-monthly, the usual repayment period is 14 days. However, this period may be reevaluated if the borrower is paid monthly.

If you cannot or do not pay the loan in a timely manner, many companies will agree to deduct a fee from your checking account and renew the loan for a period or more. However, with loan extensions, new fees are incurred with each and every renewal, and interest rates will be compounded. Because of the high interest rates (or ‘financial fee’), interest rates can exceed the amount of the loan in as little as a few months.

Another thing to be weary of is personal privacy protection. Because the majority of loans are now available online, one must be especially careful when asked to provide such personal information. In a review of one particular payday loan website, WeGiveCash.com, examination of their Privacy Policy raises some questions. For instance, WeGiveCash reserves the right to do basically anything they want with any information you supply; this includes circulating your information to third parties who may be interested to marketing to you.1

Bottom line: you must be wary when using 1-hour payday loans and payday loans in general. In addition to aiding a violation of the law (in North Carolina), the high interest rate and simplicity of renewing the loan if you cannot pay by your next payday makes it easy to fall into a downward spiral cycle of ever-incurring debt, especially if you mirror the vast majority of other payday loan borrowers and are living paycheck to paycheck.

1 http://www.pliwatch.org/reviews_wegivecash.html

Maryam Farooq

Maryam Farooq

Maryam Farooq is a senior undergrad at the University of North Carolina at Chapel Hill. She is one class away from attaining her degree in Economics and will graduate this May. Prior to her time at UNC, she attended SUNY Rockland, a small college in New York where she is from. She participated in the Sam Draper Honors Program in which she was admitted early as a high school senior. In 2007, she studied Shakespeare abroad at the University of Cambridge.

At SUNY Rockland, she served as Vice President of the Student Government Association and President of Alpha Beta Gamma, an International Honor Society for Business. At UNC, she has participated in Student Government, Economics Club, and Campus Y, a social activism organization. For Student Government, she served as an External Appointee to the Faculty Council, acting as liaison and representative. For the Economics Club, she served on the executive board as Alumni Coordinator in which she chaired the Alumni Coordination Committee. Within Campus Y, she was involved with several committees including the Speakers Committee of the Millennium Village Project1, the Research and Development Committee of the Carolina Microfinance Initiative, and Best Buddies.

Outside of academic co-curricular activities, she takes pleasure in reading, writing, and figure skating; a sport she grew up competing in, but now enjoys recreationally. Before she plans to return to academia for grad school, she hopes to serve in the Peace Corps.
Maryam Farooq

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