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Payday (Check Cashing) Loans
by: North Mississippi Rural Legal Services

Payday (Check cashing) Loans 

Certain businesses accept checks with the understanding that the check will not be deposited for 30 days.  The customers pays a fee for this service, and usually pays more in fees than would be charged on a conventional loan. 

  1. What is the difference between a regular loan and a payday (check cashing) loan?
  2. What if I am unable to pay the full amount of the contract on the date due?
  3. Can the lender file criminal charges if I don't obtain an extension or pay the amount of the post dated check?

What is the difference between a regular loan and a payday (check cashing) loan?

A regular loan sets forth a length of time with monthly payments to pay back the loan. Each monthly payment reduces the amount of you owe. In check cashing a post dated check is given to obtain money now. Before the date of the check you pay the creditor the full amount of the check and pick up the check. The amount must be paid in full at the time of the maturity usually 30 days.

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What if I am unable to pay the full amount of the contract on the date due?

The creditor can and often will grant you an extension for up to 25% of the principal amount to be paid at the time of the extension. This amount doesn't count toward payment of the contract amount.

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Can the lender file criminal charges if I don't obtain an extension or pay the amount of the post dated check?

No. The statute doesn't allow the filing of criminal charges to collect on post dated checks. However, this is different from instances where a check is written to a merchant to obtain goods and there are insufficient funds to cover the check.

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Last Reviewed On: 12/08/02
 
 
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