In United States, ads in radio, television, newspaper, internet and hoardings all refer to payday loans. These loans may be handy but comes at a very high price. These loans are known in various names like payday loan, check advance loan, post dated check loans, deferred deposit check loans. But their purpose are more or less same i.e. to offer small, short term, high rate loans.

The procedure in a nutshell, the borrower writes a check payable to the lender for an amount equal to the borrowing amount plus the fees. The Company or lender pays the borrower the amount minus the fees against the check received and the fees are a percentage of the principal amount of loan taken.

Cash advance loan taken by giving a post-dated personal check is an expensive credit option. As an example, someone interested to borrow (say) $100. He will have to pay the interest of (say) 15% for 14 days of loan period. That means he will have to write a post-dated cheque of $115 for getting the loan of $100. Once the stipulated period of 14 days expire, the lender will encash the cheque and the borrower must ensure that the money is made available in the bank account or he will have to pay the cash. However, if the borrower desires to extend the period, he may roll over the check by paying the fees or interest for another term of 14 days and so on. This way the interest or fees will mount in arithmetical progression. That means this payday loans suits to those who will be meticulous in repayment in scheduled time and borrow for exigencies only. One should remember and understand, as per the Truth and Lending Act, the lending Company must disclose the cost of the payday loans. The borrower must get in writing all the information about finance charges and annual percentage rate (APR).