A payday loan is also known as a cash advance loan. It is a small, unsecured, high interest, short-term cash loan of a small amount intended to temporarily cover emergencies. It is obtained when a borrower writes a post-dated, personal check for the advance amount and a fee and the lender holds the check for the loan period and then deposits it, or the customer returns with cash to reclaim the check.
It is important to know the terms and conditions of your payday loan as this helps protect your interests as a borrower. Knowing the applicable laws, such as terms and conditions allowed by law, rates, etc., prevents loan sharks from taking advantage of you plus it allows you to contest any unlawful proposition presented to you by a lender.
State laws are in place to protect the rights and interests of both lenders and borrowers except for the members of the military who are covered by federal law. Military Personnel, their spouses and dependent children are protected by the John Warner Defense Appropriation Act of 2007 which (1) forbids payday loan companies to accept and use post-dated checks or electronic debit to collect repayment from members of the military who are on active duty and (2) forbids payday loan companies from charge more than 36 percent in annual interest on payday loans to these people.
Each state has separate laws regarding payday loans. Some of the states with specific payday loans law are Texas, Oregon, California and Alabama. You can learn more about the laws in your state by visiting your state legislature's website.
Each state also have their own government agencies that regulate payday loans. In the State of Washington, the Department of Financial Institutions (DFI) licenses and regulates payday lenders and the payday loan industry. Even internet payday lenders that do business with Washington residents have to be licensed by the DFI and must adhere to Washington's loan limits and terms.
Just as every state have their own payday loan laws, every state has a fee limit. California imposes The maximum fee a California payday lender can charge is 15% of the face amount of the check up to a maximum of $45, Michigan imposes 15% on the first $100 of a payday loan, and Washington imposes the maximum fee is 15% on the first $500 and 10% above $500.
Tomorrow, we shall discuss in detail payday loan terms and conditions a borrower should take note of.
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