Payday Lending in United States
Payday Loans Overview in Different States
Payday loans are quick ways for anyone in the United States to get quick cash on the fly. A common reason for anyone to take such loan is when unexpected shortage of cash occurs. Different loan rules apply, based on which state you take the loan at, so it is a very good idea to research available options based on your current location prior to taking action. The idea behind this type of loan is that borrowers are supposed to pay it off as they cash out their next paycheck.
Since payday loans do not involve large amounts of cash, the minimum requirements are very low – a borrower is only required to have a bank account and to be legally employed. This alone makes this service very accessible and available to everyone that can hold a regular job.
General rules suggest that there is limited number of loans per borrower. Some even have an annual number of total loans per person, also applied to the same period for possible renewals. For longer term payday loans, the lender is required to provide a low interest rate, so that the borrower could eventually pay it off in adequate time frame. Consequently, in some states, the interest rates have maximum value, so that the client has a good chance in paying it off.
Seventeen states have policies that actually defined the interest rate as “no more than a double digit number”. Prior to that, payday lending companies had a public fight with potential customers that they keep interest rates of over 400%. In some states, this triple digit policy is still in power and millions of Americans are forced to struggle off to clear off outstanding balance on their accounts.
There is also the 36% APR cap for military families. This is based on the presumption that regular soldiers are often times short on cash and the government is thus providing a good opportunity for them to get back on their feet. With this type of loan, the average number of total transactions per year that a customer should complete comes up to 9-10 – basically less than one per month.
A common practice in getting a payday loan is the use of a paycheck for the interest fees. The borrower usually deposits the check before the actual deadline so that the bank can cash it out on time. For example, if the borrower fails to repay the balance at the end of debt cycle, or if the paycheck comes short – the borrower might have to later cover the outstanding balance in addition to a bounced check fee, which applies in such cases.
It turns out that payday loans are generally for people who are more or less financially insecure. The most loans are being taken in states, like Louisiana, which declared higher rate of poverty. The lenders are getting their profit mostly from the initial fee, so it is in their best interest to sell as many loans as possible. Therefore, methods of payment are extended to checks and cash. The short loan term is what makes these loans attractive, but in some states the 3-digit interest rate value had already put a lot of people struggling to come out of debt. Look at this resource to find out more about the facts of payday lending.
Payday Lending in Different States
Find a lender or learn about the specific rules and regulations regarding payday lending in your state by following the link below (or by clicking at the respective state in the map above).
|Table 1: Payday Lending By States|
|PLEASE NOTE: Only for general informational purposes and not to be used as a legal reference.|