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Payday loans are short terms loans that anyone with a steady job can apply for and in the majority of cases obtain. A short term loan is generally due to be repaid in two weeks, although payday loan lenders can offer rollovers and extensions bases on the short term loan law that is in force in the different states of the USA. Whether you need to borrow money before the payday to cover the expenses of an unexpected emergency or simply to have some cash before you get your paycheck, remember that what you are acquiring is a debt and that it may potentially affect your credit rating in some cases.

What You Need to Know About Short Term Loans

Legislation about short term loans vary from one state to another, but in all of them the law prevents usury by limiting the annual percentage rate that payday loan lenders charge. Even then, the interest rate of a short-term loan is usually the highest interest rate that you will find when it comes to applying for a loan.

Moreover, in the case of payday loans, you are encouraged to borrow from $100 to $1,500, but your state law regulates the maximum amount that you can borrow, and such amount should never exceed a percentage calculated over your monthly income. On the other hand, all the facilities that short term loan lending company's offer are based on your job status. If you are unemployed or have less than six months in your job, you are not eligible to apply for a short-term loan.

When Short Term Loans Affect Your Credit Rating

When you shop around for a payday loan, most payday lenders will start their sales pitch by saying that they will not check your credit history and that no matter if your credit rating is good or not, because your credit history is not a determinant factor to get your application approve. While all this speech is true, what they do not tell you is that taking out a payday loan, cash advance loan, quick cash loan, or any other name that they give to these short terms loans, is getting you acquiring a debt. Regardless of the amount of money you borrow and the term, you have to repay a short-term loan, all the lending companies report to the credit bureaus, as many other companies do as well. Your credit score is made up with all the payments, or default payments, that you make including your cable TV service, your credit card and, in one word, all consumer activity. So when you apply for a short term loan, it is expected that you repay this debt in two weeks and having your paycheck to guarantee the prompt repayment, you will probably expect to pay such debt by the due date, and the lending company will report this payment.

Now, a short-term loan can really affect your credit rating when you cannot pay within the established term and have to request a rollover or extension when allowed. Due to the high interest rate, your debt might go out of control and the failure to repay will definitely have a negative impact in your credit history.

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