Laws offer protections for those who take out loans from payday loan vendors and banks. There are many offer these loans to the public. They do it in the form of fees and other such things. This is a great opportunity for someone looking for money for emergencies.
What Are Payday Loans?
It is a loan that is for about $300 or less. The loan is due on the client’s next payday. This is an option for those who are strapped for cash or cannot wait until the next payday to get their money.
Clients can make their payments in a few ways. The first way is through their bank. This is usually the way most do it. In fact, some borrowers will not even do business with a client unless they are given their bank account. Think of this as “collateral”.
A client can also post-date a check. Now there is a fee attached to this. There is a fee attached to one of the loans. How much the fee is will depend on the amount of the loan. The bigger the loan, the more you will be charged in fees.
Compared to any other type of loan, the fees are going to be more. Most will be around the $17.50 per $100 taken out. Say a client takes out a two-week loan. Say the loan is $15 for every $100 taken out. Say the amount of the loan is for $400. In total, the amount of the loan will be about $430. This is a 400% increase in APR. Compared to credit cards, some of them are much worse.
What Are the Benefits?
The benefit is to allow the client to use the cash for emergencies. There are no other companies or banks that will make this type of loan. All payday lenders are private businesses, who risk their own capital for the public.
What About the New Rules?
The first thing is that a lender is required to access the client’s financial situation. This way he can determine whether or not the client can pay on time, while still meeting his other obligations.
The second thing is it will limit the number of loans a person can take out. Many clients will not be able to take out loan after loan like they used to.
The third thing is the lender needs to notify the client when he or she is trying to access their account. Say the lender decides to access it twice and is denied. He is then banned from accessing the account unless the client dictates otherwise. This cuts down on scam lenders trying to steal money from someone’s account.
One thing to mention about the last one involves the fees. The fees will add up over time when the lender is not successful in trying to access the account.
What Should You Do?
These new rules do help the borrower, but there is still a great deal of risk attached. Those who do take out one need to consider their options and be responsible. You may want to consider doing something else. There are things like a short-term loan from a bank. You can get a cash advance on your credit card. Yes, they will carry fees too. The fees will not be as much as the payday loan deal.
There will be exceptions for those who are military personnel. You need to contact the appropriate people and show them your credentials. Create a small budget and stick with it. Do what you can. You are only human after all. Those who feel they are becoming too overwhelmed should talk to a counselor about their money issues. There are many of them who can help you figure something out.