Payday loans have long been one of the most misunderstood loans in finance. While there are some parts of the US that have outlawed these payday loan agreements, they are still a source of quick cash for individuals who struggle to meet their bills.
There are also some that have strict rules regarding these payday loan terms, and many that do not have any regulations on these payday loans. With regulations in place, what can be expected to happen with payday loans? The first step was scrutinizing the actual terms of the loans.
One of the first courses of action for these payday loan terms, was to take control of interest rates. Interest rates were deemed too high by those officials that handle finance within the United States. There are often very few restrictions with these types of lenders, putting largely the consumer at risk.
Most states are implementing the Uniform Small Loans Law, which in turn reduces the interest that can be charged on these loans. The average APR on these loans has always been in a dangerous range, as much as 360-400% or more. The APR is calculated to similar terms of credit cards.
That’s pretty high considering that these loans are short-term loans, and that they are short-term loans, and that they are due within just a few weeks. Some payday loan centers offer the option to pay a portion of the loan amount and refinance the loan. This has to be offered, but it seems to often trap individuals into dragging out the loan to the point where it can never be repaid.
Terms like this with a high APR has left many consumers feeling a bit insecure about whether or not they can repay the loan if something else comes up. Life is unpredictable. It’s this unpredictability that is leading to positive change regarding how these loans are guaranteed and finances.
The overall terms of the payday loan works like a credit card. Proactively, the government wanted to put safeguards in place to prevent what is known as usury. This means taking advantage of consumers with high interest rates that far surpass anything the borrower could repay.
This is why the Small Loan Laws have been drawn up and put into action. It’s been a long road to getting things done with laws regarding borrowing from payday loan centers. They are now being held accountable for terms they set with their loans.