Instead of a payday loan wire transfer electronic funds transfer (EFT), most of the cash advance firms use a system called ACH, or Automated Clearing House.
Using this system, the payday lender is first able to transfer the loan
funds directly to your bank account, instead of them handing you the
cash and then you depositing the money to your bank account.
As part of the loan approval process with lender using the ACH system, you normally have to give a ACH debit authorization.
This means the borrowed loan sum (plus, typically, applicable fees) will be automatically debited from your bank account on the due date.
The system is especially popular among U.S. based online payday lenders, but you may often are able to get the funds deposited directly to your bank account (and subsequently debited) via the ACH system, even if visiting one of the storefronts in person.
The way ACH transfers can be used as part of the payday lending process
may depend on your state's laws, so always these payday lending laws,
and how they apply to your situation.
One of the most popular companies using the ACH system is Cash America, which operates around 300 payday loan outlets nationwide, under both Cash America Payday Loans and Cashland brands.
When the loan has been approved in-store after application, there are two alternative options to proceed in terms of getting the loan funds.
For one, in most cases, all the borrower has to do is to write the store a personal check, against which the money will be paid on the spot.
The other way is for the borrower to authorize Cash America to debit the borrower's deposit account electronically (via ACH), for the amount of the loan, plus applicable fees, against which he will get the money transferred to the account.
In either case, the store will either hold onto the borrowers check or will not debit the borrower's bank account electronically (ACH) until the loan's due date - which usually is the same as the borrower's next payday.
Cash advances should be used for short-term financial needs only, not as a long-term financial solution.
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