Now we all know perfectly well that the major drawbacks of payday loans are interest rates that are pretty high in comparison with the other loan and credit types. Actually, it is worth it as you get the money very fast, under only a few documents or your income information and any piece of collateral is not required. Thus, the lender’s risk is high, as when the borrowers fail to repay the payday debt, they can initiate the bankruptcy procedure and no guarantees are available.
Thus, many repeat borrowers that take out the loans for the daily needs instead of emergency and delay the payback, find these short-time credits to be not very beneficial. Their unwise credit application policy makes the comparatively affordable interests and fees that are designed for 2-4-week period multiply, resulting in the high APR (Annual Percentage Rates). That’s why, the borrowers together with the activists protest against the interest rates, demanding to lower them or to prohibit the lenders’ activities completely. However, are these claims reasonable? Let’s clarify the issue.
But for high APR that commonly make about 300-400%, payday lenders are criticized due to harsh debt collection practices. Unscrupulous lenders transfer the debt records to the collection agencies that disturb the borrowers by calls, immediate payment claims and even by consistent threatening.
According to Finder, low-income US residents use payday loans more often than the other Americans. The recent studies have found some demographic trends of the payday borrowers. Thus, short-term loans are more likely to be taken out by the people that are:
Low-income communities and students are the most vulnerable to illegal or aggressive money collection practices protest against excessively high interest rates in multiple states. The basic activists’ claims concern the minimum wage increase and restriction of the APR, introduction of entirely legal collection procedures. The demonstrations have taken place for several years already; their peak was in 2012 and the epicenter was in the southern states such as Texas or Arizona. Thus, since then, multiple laws and regulations were issued and implemented, and the payday industry is more regulated now.
According to Wikipedia, payday loans are completely legal in 27 US states nowadays. The other 9 states have implemented some payday industry restrictions that concern basically the APR limits. It often makes the payday lenders stop their activities as their risks are too high and they are unable to work under too low interest rates.
Meanwhile, according to USA Today, the lowest payday APR was in Oregon, making 156% and at Maine, showing 216%. The highest APR noticed in 2014 were in:
Thus, before applying for a payday loan, check your local state legislation and the lender’s background. Select 8-10 payday lenders that are certified and licensed and compare the interest rates and repayment conditions they offer. Honest loan providers exist, just find the best of them and take advantage of the service.Apply now