Although they aren't precisely defined, payday loans are typically pricey, short-term loans (of $500 or less) that must be repaid by your next payday. Depending on your state's laws, you can get a payday loan online or via a physical payday lender.
Payday loans typically have the following features:
Payday loan amounts are small, and in some areas there are limits on the amount of these loans. While $500 is the standard borrowing limit, there are limits both above and below this amount.
Usually, payday loans are repaid in full the next paycheck or when the borrower receives income from another source, such as Social Security or a pension. Usually, two to four weeks after the loan's initial genesis date, it must be returned. The exact due date is specified in the payday loan agreement.
Either you submit a post-dated cheque for the full amount of the loan, including charges, or you allow the lender to electronically deduct the amount from your bank, credit union, or prepaid card account in order to repay the loan. Should you not be able to pay back the loan by the due date, the lender reserves the right to electronically take money out of your account or cash the cheque.
Usually, payday lenders don't consider if you can return the loan and still meet your other financial obligations.
The loan proceeds can be deposited into your account electronically, loaded onto a prepaid debit card, or paid to you in cash or via cheque.
Other elements of the loan could differ. For example, payday loans are usually intended to be paid back in full all at once. Lenders are permitted by state law to "rollover" or "renew" a loan when it matures, allowing the borrower to simply pay the extra costs and deferring the loan's maturity date. Sometimes payday loans can be arranged to be repaid in installments over a longer period of time.
How much a payday loan costs
Many state laws restrict payday loan fees, which are normally limited to $10 to $30 for every $100 borrowed. A typical two-week payday loan has an annual percentage rate (APR) of over 400 percent, with a $15 fee for every $100 borrowed. Credit card APRs, on the other hand, can range from about 12 percent to more than 30 percent. In many places where payday lending is legal, there are caps on loan amounts, fees, and costs.
The laws of your state may regulate, prohibit, or permit these loans.
Payday lending is not permitted in those states due to state laws that prohibit payday loans, or payday lenders have opted not to operate there at the permitted interest rates and costs. In places where payday lending is permitted or regulated, you may be able to obtain additional information by contacting your state attorney general or regulator.
Protections for active duty personnel
Additional protections are available to active duty military personnel and their dependents under the federal Military Lending Act (MLA). In addition to a cap of 36 percent on the Military Annual Percentage Rate (MAPR), these safeguards include additional limitations on the amount that lenders can charge for payday and other consumer loans. Speak with the local Judge Advocate General (JAG) office to learn more about loan limits. Use the JAG Legal Assistance Office finder to find assistance.
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