Several states have put limits on how much people can pay for payday loans, which is good news for people who need short-term financial help. These caps limit how much payday loan companies, which are also called "direct deposit cash advances," can charge for these loans. Even though some states have put limits on payday loan fees, many others have not. Here are some things you should care about.
How things used to be
Before states started putting limits on payday loan fees, a small number of lenders were charging too much. Some people who needed a loan and didn't bother to look for a better deal from another lender agreed to the high fees. Because of this, sometimes they ended up with more debt than they should have.
One important thing to know is that even though some states have limits on how much payday loan fees can be, only lenders who have gone through the steps to register and get a licence to do business in those states have agreed to follow those limits. Even if they aren't licenced and registered in that state, companies can still do business in a state that limits payday loan fees. Borrowers should stay away from these companies because no one knows how well they protect their clients.
Choose a good company for your payday loan
If you want a payday loan, don't go to a business that isn't registered. Instead, look for one that is licenced to do business in your state. If the company has gone to the time, trouble, and expense of registering to do business in a certain state and agreeing to follow that state's laws about payday loans, it's likely that they will treat you in a fair and honest way.
Whether or not you check to see if the payday loan company in your state is licenced and registered, it is very important that you fully understand the terms of the loan before you agree to it. If you have questions, ask. That's the only way to make sure you don't get stuck with high interest rates and fees you can't pay, which could put you in a worse financial situation than you were in before.
Another reason you should care that some states put limits on payday loans is that if you need help, the government of that state will be on your side. You probably won't have a problem with the fees on your payday loan, but if you do, you'll need help dealing with it. With the state on your side, you'll be able to make a better case against what you think were unfair business practises.
States put limits on how much people have to pay for payday loans to protect consumers, not payday loan businesses. These states also want to make sure that people don't fall for scams like fraudulent lending and other similar schemes. If you think you've been a victim of this, you can talk to your state's Department of Banking.
