Overnight loans are also known as short term loans, payday loans, or paycheck advances, although there are often small differences between these types of agreements. An overnight loan is intended to cover a borrower’s expenses until his of her next payday, which is generally in the period of a few days to a couple of weeks. However, many of these types of loans can be taken out for extended periods, from a few weeks to a number of months. These loans may also be referred to as a cash advance, and are available in most parts of the world from a number of independent institutions. Short term and overnight loans (Tagesgeld) normally have a high level of associated interest, which people are prepared to pay in exchange for quick and trouble free access to money when it is needed the most.

For example, the term overnight loan is derived from the time it normally takes for these kinds of loans to be accepted, with people receiving money the next day and sometimes even within hours of initial application. Different institutions have different rules for processing applications, with some lenders needing access to credit records and others needing only a pay slip or a signed guarantee from another person. The industry involved with short term and overnight loans is active all over the world, and is not normally associated with banks, building societies, and other leading financial institutions. Some of the types of companies who offer short term loans include pawn shops and second hand retailers, along with a number of dedicated fringe lending companies.

Short term and overnight lenders often operate under specific usary limits which are set out in national guidelines, to stop lenders from charging too much and taking advantage of people at their time of need. However, due to the short term nature of many pay day loans and similar schemes, the effective annual interest rate is normally much higher than it would be if lending money from a bank or other kind of financial institution. The compounding nature of interest in many of these agreements also makes the costs potentially much high, with additional charges also involved in many cases. However, while it may not be perfect, the short term loan industry does fulfil a role in society and is used by people all over the world to help them get by in times of need.

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