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The basic idea of a payday loan is that a borrower who needs to meet immediate cash needs ahead of his or her next paycheck can essentially take an advance by borrowing the money. The term of loan will typically last from the day the loan is made until the next scheduled paycheck is to be received, so this is a solution only in cases where the need is immediate and very short-term. In order to ensure that the lender has limited risk, the borrower must often make repayment arrangements at the outset of the process. In the past this has meant that the borrower provides the lender with a post-dated check for the amount of the full loan repayment. While the borrower is expected to return to repay the loan, the physical check was left as an additional assurance. If the borrower failed to show up and repay the loan, the lender could simply deposit the check.

With modern technology, this process has been updated and now uses electronic transfers instead of physical checks. Banking information can be verified within minutes using online banking capabilities, allowing direct lenders to make nearly instant approval decisions. The advantage of working with direct payday loan lenders is that a direct lender controls the process from start to finish. When one works with an intermediary, there are advantages, but often the process can take longer. As soon as the lender has verified the banking and employment information of the potential borrower, the loan can be approved. Funding can be completed within a few hours. The slightly longer time for funding is often a function of the bank which may require a small amount of processing time get the money completely into the borrower’s account.