Payday loans are a great service, but if you do not know your lending rights, you could end up paying more than necessary. Similar to a bank loan, a payday loan is a short-term cash advance that you can utilize during an emergency. Whether you need a car repair, money for rent or cash for another bill, you can get a fast loan with no credit check or collateral. Before you commit to a loan or a lender, make sure you know your rights.
Payday loan limits.
Each state places limits on how much borrowers can receive from a payday loan lender. In some states, the loan limit caps at $300, whereas other states allow payday loans up to $1,000. Do your research before borrowing to know what’s legal in your state.
Cost of the loan.
Federal laws and state laws require payday loan lenders to disclose loan fees in the application. The interest rate on these loans are much higher than personal bank loans. In fact, some lenders charge as much as $30 per every $100. Apply for a $300 loan and you can pay $90 in finance charges. Make sure you have a clear understanding of the fees before you sign the agreement.
Repayment schedule.
During the application process, payday lenders are also required to provide information regarding repayment. This includes the date your loan is due, as well as acceptable methods for repaying your loan. Some lenders allow 30-day payday loans. If so, the lender should disclose this information on their website or within the application.
Consequences for defaulting.
If you are unable to pay back your payday loan, federal law and state law protects you from harassment. The payday lender may refer your account to a collection agency or file a civil suit, but they cannot threaten you with criminal prosecution. If you’re abused by a payday lender or an agency hired by the lender, file a complaint with your state’s attorney general’s office.
Termination.
Depending on your state, you may be able to cancel a payday loan within one day and pay no finance fees. This rule varies from state to state. Read your loan agreement carefully and look for information regarding termination. You can also research your state’s lending laws online. If you’re allowed to cancel your payday loan, return the funds to the bank and pay nothing more.