Consumer Financial Protection Bureau Targeting Payday Lenders
Payday loans, also called payday advances, are definitely not for the faint-hearted. They can prove to be very costly if you are not careful and can prove to be a costly venture as well. It is very important to understand what you will be getting and what is expected from you in exchange for the payday loan. Understanding what is involved in a payday advance loan can help you decide if this is the right thing for you. Payday advances can be a good option if the need arises, but they should only be used as a last resort.
Each state has its own laws about payday loans, lending institutions, and the like. The states also have differing rules about borrowing in general, so it pays to research each one very thoroughly before deciding whether or not to borrow. The best way to research these laws is to check out your lender. Most lenders are reputable and they should be able to help you understand the different laws that apply in your area.
One area of the law that may be confusing about payday loans is the annual percentage rate (APR). APR is the interest charged by your lender on the amount you loan. The annual percentage rate is figured by taking your annual salary minus any bonuses or income that you might have earned. Because there can be a difference in the actual interest charged between the annual salary and the bonus or income figure, the lender will calculate the APR based on the difference. While this is a convenient way to calculate your APR, you should be aware that this figure is usually fairly accurate and you should look for a lender that provides an apr calculator on their website.
Most lenders will require that you pay off your loan before it is due for payment. This means that when your loan is due, you must make the entire loan payment or find another lender to extend the payday loans. In addition to the payment you must make each month, some lenders will add additional fees to your loan. These fees, such as late payment charges, are often assessed at a higher APR than the loan itself.
Depending on your state laws, repayment of payday loans may include paying a fine. For example, in some states, if a borrower does not repay their loan on time, they can be forced to repay the full amount plus interest. Your payday lender should inform you of any and all charges that you may be required to pay. If you repay your loan early, some states will forgive the late payment charge altogether.
If you are considering applying for payday loans, the last thing that you should do is sign up for a program without understanding what the lending act or your state’s laws actually say. The Internet can offer a variety of information on payday lending. You can find out more about the state laws that may affect your lender, as well as what the annual percentage rate or EPR may be. Many lenders will require borrowers to commit to a long-term contract. While signing up for a program may give you peace of mind, understanding what the terms entail will help you make the best decision for your individual situation. Before applying for payday loans, be sure to ask your lender how much interest will be added to your loan and if your interest rate will change once you commit to a contract.
One of the biggest misconceptions about payday loans is that they are intended to be used for immediate financial needs. Unfortunately, this is not the case. A payday loan is typically a short-term loan for emergency expenses. Therefore, you should only use payday loans for situations where you know you have few options and will need the funds now. Payday loans do not make good long-term financial decisions. Instead, they should be used as a short-term solution until your next paycheck arrives.
Since the current economy has wreaked havoc on many peoples’ finances, payday loans are now being scrutinized even more closely than in the past. In particular, many people are being targeted by payday lenders who are systematically pushing borrowers into expensive debt cycles. In addition to being predatory financially, this practice also makes consumers vulnerable to theft. If you are considering taking out a payday loan, be sure to consider the above advice before making the leap to sign on the dotted line.