How Payday Loans are a trap
by Payday expert on Jul 28, 2012
Payday loans use a short term loan to trap their lenders. These terms can be as short as 7 days in some states. What happens 7 days after I get my Payday Loan? You either need to pay a fee to extend the loan, or pay it off by getting another loan. Well now you need to pay the interest on this new loan. Often people take out 7 loans just to rollover their original debt. This is the reason payday loans are a high cost. States vary on the way their laws regulate payday lenders. Often times people may take out a loan online where the lender might be in a different state where the payday regulations are more lenient and the interest are higher. Your state can not protect you and you are to pay the interest allowed by that particular state. Always beware of the term and interest rates of your loan amount.
States with the highest payday loans
Texas allows short term loans which quite often cause economic distress in their communities.
Kentucky regulates by only allowing two loans no more than $500 from each lender. Often times the borrower will take out another loan from a different lender to pay off their original loan. The end result is still in favor of the lender and the borrower ends up deeper in debt.
Indiana prohibits payday loans to exceed more than $550. Lenders can only charge up to 15% on the first $250 of a loan, up to 13% on amounts between $250 and $400, and up to 10% on amounts more than $400.
Louisiana allow lenders to charge up to 567% annual percentage rate (APR) for a 2 week $100 payday loan. Do not take out loans in Louisiana.
Ohio allow lenders to charge up to 28% annual percentage rate (APR) for payday loans.
Washington regulates by only allowing residents not to exceed 8 loans per year.
Missouri prohibits payday loans above $500 and requires loans to have a minimum term of 14 days and a maximum of 31 days. The state also prohibits lenders from charging more than 75% of the principle in interest and fees on the loan.
Oklahoma regulates by allowing lenders from lending a loan to a borrower with more than 2 outstanding payday loans.