Payday loans are a quick way to get your hands on emergency cash to pay rent and avoid eviction, pay utilities and avoid a shutoff, or a wide range of other scenarios. Familiarization with payback terms and state regulation is crucial, to ensure that borrowers avoid financial straits while repaying their debt.
In five states, payday loans are subject to increased regulations, resulting in a more affordable scenario for borrowers. By capping interest rates, borrower and lender operate on a more level playing field. For example, interest rates are stipulated to remain low enough to protect borrowers, but high enough for lenders to operate their businesses with a margin of profit.
Payday loans are banned in some states due to several reasons. Unethical lending at high-interest rates is one reason why individuals who borrow often fall victim to bankruptcy when they are unable to repay debts.
Another reason for statewide bans is due to unlawful collection practices that violate the Fair Debt Collection Practices Act (FDCPA).
Lastly, lenders may issue loans with automatic rollovers, which result in an increase in the borrower’s debt. A “rollover” means the borrower pays a fee to renew the loan or extend the loan’s due date. However, by delaying repayment, new interest accrues on top of the interest already owed. Each time a loan is rolled over the cost of borrowing increases.
We at PayDayAllDay strongly suggest our consumers to do their research, and carefully analyze and compare the terms of services, rates of fees, and other conditions offered by several lenders before engaging in any borrowing activity.
1. Heather Morton (2018). Payday Lending State Statutes. Ncsl.Org. Available at http://www.ncsl.org/research/financial-services-and-commerce/payday-lending-state-statutes.aspx#RI
2. (2017). Payday and Installment Loans State Law Matrix. Onlinelendersalliance.Org. Available at https://onlinelendersalliance.org/wp-content/uploads/2017/07/2017-PDA-Installment-State-Matrix.pdf
3. (2016). Car Title Loan Regulation. Consumerfed.Org. Available at https://consumerfed.org/wp-content/uploads/2017/01/11-16-16-Car-Title-Loan-Regulation_Chart.pdf
4. Legal Status of Payday Loans by State (2018). Paydayloaninfo.Org. Available at https://paydayloaninfo.org/state-information