Let’s start this article by briefing you on the term payday loan. This is a short-term loan, where you will have to pay a high-interest rate for getting a loan from payday loan lenders; the good part is that the rate will vary depending upon your income. Let’s have a look at the key points.
- It is short-term with a high rate of interest.
- It is based on how much you earn;you will have to show your income proof to prove it.
- It is not available in all of the USA but only in 16 of them; some of them are Arizona, New Hampshire, New York and many more.
- New laws and regulations have been imposed on these loan providers.
What is the working principle of a payday loan?
If you want to take loans from them, you will be required to show proof of income source so that you will get an offer. After providing the evidence, they will make an offer with a high interest rate which will be required to payback at the end of the 30th day.
The reason behind charging very highinterest is that they take huge risks by providing a loan without any collateral. They also charge very high fines if you miss paying on time.
The payday loan legal or not:
There were efforts made back in 2016 and 2017 to protect the borrowers under the act of the Obama administration to save the borrower from the debt traps. Those rules and regulations mention that the lender should not lend money more than the borrower’s paying limit so they do not get trapped in the debt trap.
It is also mentioned that the lenders will have to send a written notice before trying to collect money from the borrower’s bank account, and the lender cannot attempt to recollect the capital after two unsuccessful tries. In short, yes, they are legal and are getting some new regulations to make it safer for the borrowers and also for the lenders.
Are they fixed, or may they vary?
The term payday means that you will get a portion of yourregular income in a month, which clearly implies that they are not fixed but may vary depending on your income. However, the rate of interest is fixed because of these terms.
There are many lenders available online from where you can quickly get a loan; you must be aware of the debt trap because many borrowers fall into this trap and end up losing all their possession. Fortunately, the government is trying to impose some new laws which will protect your right.