PAYDAY LOANS: HOW THEY WORK

Payday loans work like this:

* You fill out an application and provide the lender with items such as paycheck stubs and a photo ID.
* You sign a loan agreement, write a postdated check to the lender, and receive your money.
* Your check is held until your loan payment is due - usually two weeks. The lender then deposits your check - unless you have replaced the check or have already repaid the loan.

The loan agreement that you are required to sign is a legal document that obligates you to repay the loan. It also sets forth a lot of important information. Be sure to take note of the following items:

Amount Financed: The amount of credit provided to you or on your behalf. (This is typically the amount of cash you will receive.)

Finance Charge: The dollar amount the credit will cost you, or the amount of interest you pay for receiving the credit.

Annual Percentage Rate (APR): The cost of your credit as a yearly rate. Because these loans are small, short-term transactions, the APR is typically quite high. In Wisconsin, there are no laws that limit the interest rate that a lender can charge.

Total of Payments: The amount you will have paid after you have made all payments as scheduled. (This is the amount that you will write your postdated check out for.)

YOUR RESPONSIBILITIES

The loan agreement you sign legally obligates you to repay the loan. Make sure to read the contract before signing it and retain your copy for your records.

If you have not renewed the loan or paid it in full, make sure you have sufficient funds in your checking account on the due date of the loan so your check clears when the lender deposits it.

If you cannot or do not repay the loan, the lender can seek a money judgment against you for the face amount of the check and court costs; and, if they were disclosed in the contract, any late charges, interest after maturity, and NSF fees. Once a money judgment is obtained, a lender may attempt to garnish your wages.

Many lenders also list past due accounts with the credit bureau. This may affect your ability to get credit in the future.