A payday loan is really not hard to take out and can have many benefits. Most often your lender will ask for a check dated for a later moment. Another option to repay the loan and associated costs of the transaction would be to allow the lender to deduct these accounts.
Once completed, your payday loan may be in your hands as soon as the next day. As the name implies, this money will be due the very next payday, or as long as four months from the date the issue was loaned.
How do Payday Loans Work?
The lender will issue a loan that will be paid back as a lump sum at the first convenient moment, typically after the next Payday.
Of course, specific lenders may offer different solutions to pay back the loan. These can be paid back over different spaces of time and will typically involve authorizing the lender to deduct the payments from the borrower’s bank account electronically. A payday loan could be anywhere from $100 to $1000, depending on the state you are in.
Most loan terms will run for two weeks and include an APR of about 400%, sometimes higher. There will also be financial charges between $15 to $30 when borrowing $100. For the average two-week loan. Those states with no maximum cost limits will have a higher APR than states with limits in place.
What are the Payday Loan Requirements?
All that is needed to take out your payday loan is a bank account with relatively good history, an identification and a steady source of income. Lenders will not perform the same types of credit checks as they would for a regular loan. It is important to consider that these loans are made on the capacity of the lender to collect, not on the borrower’s capacity to repay their loans. This can create a trap for the unwary.
Where Can I Find Payday Lenders?
You will find payday loan leaders in operation all across your city. There are payday stores as well as stores that offer other kinds of financial services like title loans, check cashing and pawn shops. It is the licensing requirements set by the state that determine who can offer this solution.
Legal Status for Payday Lending
32 states authorize their high cost payday lending through state regulations and laws. In Washington D.C. as well as 15 other states, borrowers are protected from the high costs of payday lending with prohibitions and other small rate caps that limit loan sizes. The remaining three states will set lower rates and apply longer terms to higher loans.
Online lenders are typically governed by the licensing laws, prohibitions and regulations in place in the state where the loan is issued. You can find more information about the guidelines in your state by referring to the legal status on local payday loans in your area.
What are the Protections in Place for Dependents and Service Members?
Payday loans are not typically offered to those in active service or any of their dependents. This policy was begun in October of 2016 and applied special protections for service personnel and their families under the MLA or Military Lending Act.
What this means is that, no more than 36% APR including fees can be applied to payday and title loans by lenders to service members and their families. This will include making debt authorizations, taking checks and car title loans. The rules outlined in the Military Lending Act are enforced by the Consumer Financial Protection Bureau.
Final Notes on Payday Loans
Payday loans, also called a cash advance, can be a great way to meet financial responsibilities before they get out of hand. But, these loans are a two-edged weapon and must be considered carefully. It is also important to look into the local rules governing these loans before you take one out.