What you need to know about Payday Loans
There is a lot of data you should be aware of about payday loans, and there is a lot of it I would like to convey to all my readers. But you would understand if I told you that itIs not possible to convey everything in one article only. So I would like to focus on less known things about payday loans, figuring that you have basic knowledge about some more well-known payday loans facts.
Numerous state laws in USA as well as some country laws around the world acknowledge high interest payday loans, and there are rules that are made to guide lenders in respecting boundaries that were set. Those laws limit APR, as well as actions that can be taken against the borrower that doesn’t fulfill their obligations.
But in reality those boundaries that are created by law are working against lenders, due to low caps on APR they are allowed to use. That is why payday lending industry has shifted to underground and illegal lending rather than companies that follow the rules.
The risk for giving those loans to people that are not able to clear all requirements to receive bank loans is high, and small APR doesn’t cover the risk of giving those loans.
Laws limit actions that can be taken against borrowers, which is one more thing that limits the possible profit of the lenders. It is true that courts favour lenders, but that fact doesn’t cover costs those lenders have to pay to the court if they want to force one of the borrowers to repay their loan. In classical above the law and behind the scenes payday lending threats, both oral and physical maintain high loan repayment percentage. Without these tools lenders can’t do anything but plea to the court and hope that will force borrower into fulfilling his obligation.
Due to facts in previous paragraph or two many payday lenders use a variety of tools and instruments to evade small loan laws as well as usury laws. Those laws monitor cash flow and due to that payday lenders have found several ways to sham their transactions. For example, some lenders will make their operations to look like credit services organizations which are unregulated kind of services, and with this they avoid small loan laws. This is of course illegal. Even though these laws exist, there is no strong emphasis on enforcement of those laws.
Many states cut their costs by not placing strong emphasis on these laws, believing that people have common sense and they can recognize payday lending organizations that use over the top interest rates.
At the end the point of payday loan is to trap people in taking them on regular basis. Once you take one payday loan you will have large amount of money to repay once you get your salary. This will force you to take another payday loan to cover the cost of repaying previous one, and this cycle is exactly what payday lenders want. Be smart, and avoid, if you can, taking even one payday loan. Inform yourself about payday loans, and think what you will do.