Payday Loan Laws

In the United States, payday loan laws are state regulated. Payday loan is one of the most convenient ways for you to borrow money to meet your emergency expenses before your next paycheck arrives. However, before you take a cash advance, you should know the laws and regulations governing it. In some US states, this loan is legal while in some states it is not. In states where this loan is legal, there are certain rules and regulations that have been passed for borrowers and lenders of these loans.

Laws That Are Imposed By States For Payday Loans

All states have different rules and regulations. Given below are the general rules and regulations that are imposed by states where payday loans are regulated.

An upper limit to the interest rate and fee can be charged from the borrowers of these loans. Annual Percentage Rate calculates the maximum rate of interest.
There is a limit to the cash that one can borrow at one time.
There is a ceiling to the maximum number of such loans that a borrower can take in a year.
In some states, after taking a certain number of borrowings, the lending rate is reduced to enable the borrowers to come out of debt trap.
The lender has to state all the terms and conditions clearly.

These regulations have been introduced in the interest of borrowers. Payday loans have high rate of interest and persons taking such borrowings usually has a bad credit history. To help such people come out of the vicious cycle of debt, some states in US have introduced these rules and regulations. These rules and regulations control the lending industry as it has been seen that before the enforcement of such rules and regulations, the lenders used to charge hefty fees and rate of interest for these borrowings. They seldom used to hide the terms and conditions in lengthy agreements.

Lately, some legislators have been advocating a complete ban on these loans stating that they are not good for the financial health of people. In October 1986, US Congress passed a law that has put a limit to the interest rate that can be levied on the military personnel for payday loans. The maximum limit for interest is at 36% annual percentage rate.

While applying for a cash advance you should check the laws regulating the cash advances in your state.

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