Payday loans are short-term loans that are usually given to persons who live from paycheck to paycheck, for whom the last week of the month is a very difficult one to pass.  Soldiers are prone to take payday loans as they usually have a large family to support within a tight budget.
 

Features of payday loans

• Payday loans or cash advance loans are small loans of $100 to $500, which are given to civilians and military personnel, to tide over unexpected expenses until the next paycheck arrives.
  
• Banks, financial institutions, and private moneylenders offer payday loans to military personnel since they have a steady income and are guaranteed of receiving their checks on the payday.
  
• The soldier who desires a payday loan has to give a post-dated check that comprises the amount of the loan, the interest, and a small service charge.  The lending company gives the amount of the loan to the soldier, and presents the check on the payday, when there are sufficient funds in the account of the soldier.  The soldier may also opt for the check not to be presented and settle the amount of the check by cash.
  
• The repayment of the loan has to be made on payday.  In case of difficulty, the amount may be carried forward to the next coming month’s payday.  This is known as a “roll over”.  The interest for the next month plus the service charge has to be paid again.  Payday loans can also be availed over the Internet.  Online transactions of payday loans are fast and the money is electronically credited to the soldier’s account, usually within a matter of few hours.  The soldier can then withdraw the money from his or her account as and when the need arises.  Online transactions are gaining popularity due to the speed and the convenience offered.
  

Pitfalls of payday loans

• You take a loan because you are short of cash.  The amount of the loan is deducted from your next month’s paycheck.  So again next month you will be short of cash.  With limited cash, you can tide over the month, if you curtail your expenses.  If you cannot do so, then you have to make the loan roll over for the subsequent month.  Usually roll over of the loan takes place, as with an extremely tight budget, curtailment of expenses is generally not possible.  This leads to a vicious cycle where the soldier is drowned deeper and deeper in debt.  A loan of hundreds can lead to a debt of thousands by succeeding “roll overs”.
  
• Before taking the loan, the soldier must be prepared to undergo austerity measures for the subsequent month, in order to repay the loan. 
  
• Payday loans are costly loans as the interest charged is huge.  About $10-$30 is charged extra on each $100 loaned.
  
• Moneylenders usually set up shop near military bases, where they can easily get soldiers who need such loans.  To lure soldiers, they also employ ex-military personnel, who give credibility to their payday loan schemes.
  
• A payday loan has to be repaid.  Hence, before taking the loan, the soldier must have a valid reason to take the payday loan. Taking a payday loan for day-to-day expenses is strictly not recommended.