Category Archive for: "Payday Lenders"
Payday loans are currently illegal (or HIGHLY regulated) in 14 states (Arizona, Arkansas, Connecticut, Georgia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Vermont and West Virginia), but that hasn’t stopped payday loan lenders from making loans in those states!
How exactly are they LEGALLY doing it? Some have partnered with banks with out of state headquarters, while others have partnered with Native American Tribes that have been, in essence, granted a free pass thanks to the Indian Reservation System.
CNBC recently reported on this loophole and showed us how Native American Indian tribes are not held to the same legal standard. In fact, as long as you get your payday loan online from a payday loan lender that is partnered with or is run by a North American Tribe, it’s apparently not illegal at all.
To me, this is proof of how the payday loan industry will be run in a few years. As more and more states outlaw payday loans, the only place you’ll be able to turn to for a fast, cash advance is the Indian Tribes. As far as I’m concerned, this is karma coming full circle. When our forefathers arrived in the New World, they decimated the Indian population and took their land from them, pushing the few remaining Indians to the least hospitable pieces of land known to them at the time. For years, Native American Indian tribes have struggled to find a way to survive and prosper the way they once had.
Indian casinos have definitely helped, but its not easy getting everyone to drive a couple of hours to your remotely located casino where they will gamble enough to pay for all the casino employees’ salaries AND bring in enough money to help the rest of the reservation rise out of poverty.
Online payday loans are definitely the wave of the future for Native American Indian tribes that want to help their people break the cycle of poverty. They can lend to anyone in the United States at incredibly high rates (although often lower rates than other payday loan lenders offer) and are not restricted by any states boundaries. My prediction is that in a couple of years, most of the payday loans made in the United States will be made by Native American Indian tribes or their partners.
The truth of the matter is that Payday Loans are a necessary evil. According to a 2009 CNN article, 17 million people didn’t have bank accounts in the United States in 2009. That number has risen to 30 million people in 2012 according to a recent Business Insider article! That’s over a 76% increase in 3 years. That shows you just how hard economic times have become.
Most people turn to their bank when they need a quick, short-term loan, but if you don’t have a bank account, you can’t qualify for a loan from the bank. It’s a Catch 22. You need money to open a bank account in order to get a loan, but if you had money in the bank, you wouldn’t even need a payday loan in the first place.
So, if you ever find yourself in a situation where you NEED a payday loan, be sure to read as many online payday loan reviews as possible before proceeding with the lender you trust the most. Remember to always check out their lender rating and understand the terms of the loan before fully committing.
It looks like Payday Loans are finally becoming legal again in North Carolina according to a recent story from news station WRAL. Payday Loans made a brief appearance in North Carolina from 1997 to 2001 before they were allowed to expire by lawmakers due to public pressure. But even then the smart payday loan lenders simply teamed up with local banks to legitimize their operations.
Now several banks have come out with their own version of a payday loan to tap into the incredibly lucrative payday loan business. One such bank is Alabama based Regions Bank. In fact, Regions Bank has been offering their own version of the pay day loan (known as Ready Advance) for a year and a half here in North Carolina at the low rate of 365% APR.
The only catch with Regions Bank payday loan is that you have to have been a bank account holder of Regions Bank for at least 9 months in order to qualify for their payday loan So, looks like online payday lenders still have a viable market for those that don’t have a Regions Bank account. But now other local banks, like Suntrust Bank, are taking notice and considering bringing out their own version of the pay day loan. Everyone wants a piece of the pie and consumers apparently always need short-term loans in times of emergency.
So, which is better, getting a payday loan from your local bank or from an online lender? Well, unless you have a bank account with Regions Bank, then your only other choice is going with an online payday loan lender. Be sure to read the reviews on the payday lender you go with first though, so you know what you’re in for.
The FTC recently weighed in on Payday Loans and I couldn’t agree more with their take on things. Payday loans are NOT loans that should be taken out for frivolous expenses like eating out or getting a new TV just because the sale ends before your paycheck arrives! Use common sense here people and ONLY get a payday loan in case you REALLY have no other choice.
To understand why you shouldn’t get a payday loan for these types of discretionary expenses (wants versus needs), you first need to understand what a payday loan is and how a payday loan works.
What is a Payday Loan?
A small (usually under $1000), short-term (should be paid back at next paycheck: 2-4 weeks), high-rate loans (ranging from 7% if you have the most amazing credit score ever and don’t mind waiting a week or two to receive the money) to 450% if you have terrible credit and need the money in an hour) by check cashers, finance companies and private lenders.
How Do Payday Loans Work?
When you get a payday loan online, you agree to let the lender withdraw the loan amount on your next payday. The payday lender will usually deposit the loan you requested (minus their fees) within 1 to 24 hours. The fees on pay day loans can be a percentage of the amount you borrowed or they can be based on increments of money borrowed (i.e. you pay a set fee for every $100 you borrow). If you ever need to extend (aka “roll over”) your loan past the usual 2-4 weeks (one payday period), you will be charged new fees each and every time. These fees can really add up, so do your best to pay it off in the one pay period you originally agreed to.
Real Life Example of How A Payday Loan Works
Lets say you need to borrow $200 to pay for an unexpected car expense. You signup online with a reputable pay day lender for a $300 loan. The fee per $100 borrowed is $15. So, instead of getting $300 deposited into your bank account in 1 hour, you only get $255 ($300 loan – $45 in loan fees = $255 deposited into your bank account0. When the loan comes due in 2 weeks, the payday lender will auto-withdraw the amount you borrowed ($300) from your bank account. If you need to extended the loan because you don’t have the $300 needed in your account, the lender will do it, but you’ll need to pay another $45 loan fee! That’s how the APR (Annual Percentage Rate) can climb all the way up to 450%+
The Federal Truth In Lending Act Is Here To Help
Just like when you’re getting a car loan or a mortgage, every payday lender MUST disclose the cost of the loan to you. They must give you the finance charge (a $ amount) and the APR (the cost of the loan on a yearly basis) in writing before you agree to the loan. The APR is based on several different things, including the amount of money you borrow, the interest rate on the loan and credit costs you will be charged, and the expected length of your loan.
Here’s one such disclosure chart from the popular payday loan / personal loan provider Great Plains Lending:
Cheaper Ways To Get a Short Term Loan
If you don’t need the money in one hour or even a couple of day and you’ve got good a good credit score, then you should really consider getting a loan from a personal loan provider instead of a payday loan provider. Personal loans take longer to receive (up to a week or two) but are much, much cheaper than payday loans.
If you’re not under a serious time crunch and you’ve got excellent credit, then you should really get a short-term loan from someone on Prosper.com where rates start as low as 6.59%. Learn more at www.prosper.com