Loan Terms

• When an individual takes out a payday loan, she will generally provide the lender with some form of payment, such as a post-dated check or a checking account number, that the lender can use to receive payment when the loan comes due. Unlike many other types of loans, which are paid back in installments, payday loans are intended to be paid back all at once. The name "payday" derives from the idea that the loan is supposed to hold the borrower over until she receives her regular paycheck.
  
  

Default

• The term "default" is generally applied to a loan in which the borrower is late on making a payment. The term can certainly be applied to delinquent payday loans. Although the borrower does not typically repay the loan in installments, he must make that single payment on time. If the check he provides bounces or his account has insufficient funds to cover the transaction, he is technically in default on the loan.
  
  

Consequences

• When an individual defaults on a payday loan, she will likely face several consequences. First, she may be liable for a number of additional fees. These fees, which are usually written into the payday loan contract, are applied for being late in paying back the loan and for attempting to pay from an account with insufficient funds. In addition, the borrower may face a higher, punitive rate of interest and harassment from creditors.
  
  

Roll Over

• Sometimes, when an individual defaults on a payday loan, the loan will simply "roll over" to the next month. This means that the principal of the loan, plus any fees and interest payments applied to it, will become the principal of a new loan, which will be charged additional interest. This new loan will usually be due within a month. If the borrower fails to pay, then the loan will roll over again, and the individual will slide deeper into debt.