What are lenders allowed to charge you?
The Annual Percentage Rate, or APR, is one of the main costs you need to worry about with a payday loan. In most states that regulate payday loans, you’ll find the APR is restricted. The restrictions may come in the form of a percentage of what lenders can charge you based on what you borrow. For instance, in South Carolina lenders aren’t able to charge you more than 15% of the amount you are approved for.Another regulation you’ll find is a restriction on the total amount you’re able to be charged per year. Such as in New Hampshire, where you won’t be charged more than 36% per year for your payday loan. In Idaho and South Dakota no regulations are imposed, so it’s up to the lender how much they want to charge you.
Keep in mind that the regulations may only apply to the interest rate, so the lender may also impose certain fees. These usually include late fees or charges, but lenders may also charge you for refinancing your loan or for receiving your loan amount through a prepaid debit card they have offered you. These fees have been regulated in some states – in Missouri you won’t have to pay more than 75% of what you borrow back in interest in fees – but in others they remain at the discretion of the lender.
How much you can borrow and how long you have to repay
The terms and loan amount are another regulation that is imposed by states. The state with the highest allowable maximum loan amount is Oregon, with borrowers being able to apply for up to $50,000 and having up to 60 days to repay it. Oregon is an exception though, with a typical state-imposed maximum being around $500. You may also find that your state will not allow a lender to approve you for a loan amount that exceeds 25% of your gross monthly income.Payday loans are called as such because they’re designed to last until your next payday. This means that a typical loan term will be two weeks to one month. State regulations tend to have kept this as a standard, with many imposing minimum terms of seven or 14 days and maximum terms of 30 or 60 days. Other states, such as Nebraska, have no minimum terms, with the maximum term just being set as 34 days. Colorado is one of the only states to extend the payday loan term, imposing a minimum term of 60 days and no maximum.
How long you take the loan out for can have a huge bearing on the amount of interest you pay, and it also affects the ease at which you can budget your payments. Make sure the amount you’re borrowing and the payment plan aligns with your budget as well as the prevailing state regulations.
Regulations for payday loans vary greatly state to state. If you’re a resident of Delaware you can borrow up to $1,000 and have up to 60 days to repay it, while Alaskan borrowers can only borrow $500 and need to pay it back within two weeks. Borrowers in Arizona, Arkansas, and New York will find that payday loans are completely prohibited in their state. The regulations have a huge effect on what lenders can charge and it’s also important for you, as a borrower, to be aware of the regulations and make sure your loan has the right terms, fees, and amount applied.
