Payday Loan State Regulations
Payday loans are regulated in many states. According to a National Conference of State Legislation publication, there are thirty-eight states which have payday lending statutes. They each vary as to how much the maximum loan amount can be, how long the loan term can be for, and a range for finance charges. This publication is not for legal use, but as a reference to understand what your state statutes are towards the payday loan industry.
States began regulating payday loans after numerous complaints of payday loan companies taking advantage of people in vulnerable financial positions or targeting the poor. The companies controlled how much could be loaned and the fees and interest rate amounts. The high numbers made the customer's situation worse and the debts accrued were becoming out of control. Any company who targets people with limited or no ability to pay the loan back is not good example within the industry.
There guidance to control the amount borrowed was set to help the borrower pay back the loan. The loans are short-term and the full amount is expected to be paid at the end of the loan term, (which is also regulated by the state). If you are not able to pay off the loan plus the fees when the payoff date arrives, the total amount due will then be subject to interest rates. The fees for the money being borrowed as well as the rate of interest applied to it will be carried over to the next payoff date. The snowball keeps rolling and growing with interest rates continuously applied. Because the interest rates are much higher than regular banks loans, the balance skyrockets unless you pay off or pay down on the total. Before state regulations came into effect, the payday loan companies were charging higher rates crippling the finances of a majority of users.
The payday loan industry continues to carry a bad reputation for targeting the poor. There are bad apples in the bunch who do steer their business in that direction, but the majority have clients from numerous income levels. Responsible lenders will follow the state guidelines and lend to those who pass reasonably set qualifications. If the income of a person is $900 and the state allows loans up to $500, is it reasonable to lend out the maximum amount and expect full payment plus fees at the end of the term? This would be irresponsible by both parties to think this will happen within the term limits. The annual percentage rates are over the top, but ideally no one should ever have to be paying on their loan for a year. Even if you can buy down the loan by a few dollars each pay period, you will be taking the balance in the right direction.
State regulations are set as guidance to the payday loan industry, but there is still room to maneuver within. The maximum amount for fees and interest are set, but if you shop around, you will find companies who will charge below that amount. Take advantage of competitive rates and find a lender whose practices are not geared towards the maximum amounts. Whether you are going to a payday loan store or applying online, know the guidance from the state you live in and find a company who works within those limits.
About the Author
Approved Money Center Payday Loans provide quick cash loans when payments cannot wait. the cost effective fees save you from overdrafts and late charges. Visit http://www.approvedmoneycenter.com for more information on store locations and qualifying information.
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