Governing Laws of Payday Loans

If you are considering the payday loan solution for your financial needs, researching the rules associated with one or more payday loan companies may give you a better idea of the security involved with payday loans.

Though some consider the payday loan service to be similar to a loan shark… this is certainly not the case. Payday loans are an entirely legal loan system, and there is no threat of having your legs broken. In fact, no reputable payday loan company should allow you to borrow a loan amount more than you can afford to repay.

A potential borrower’s income and ability to repay within the preferable payday loan terms are both key factors when deciding the payday loan amount that a borrower will qualify for. No reputable payday loan company will encourage you to borrow more than you can afford. Most payday loan companies will not even approve you for a payday loan that you can not afford to repay.

This is a legal standard that is designed to protect both the customers and the providers of a payday loan service.

A payday loan is an unsecured, short term loan that is easily available on the internet, with many companies competing. The payday loan service has been considered controversial due to the easy access that a person with internet access has. Since payday loans do not use a credit check to qualify a borrower, many consider the payday loan service to be ‘a trap’.

Payday loans are an especially useful option for those who do not have any other loan options, due to credit problems. But what really sets payday loans above other loan options is the fact that you can have ‘easy access to (up to) $1000 in 24 hours or less’.

This option will tempt the financially irresponsible along with the financially responsible individuals with urgent financial needs that can not wait until their next payday. An example of a good reason to apply for a payday loan is unexpected car repairs.

While the payday loan controversy tends to focus on the payday loan service as predatory, this is a one sided view. Fortunately, there are laws governing the payday loan service that are designed to protect both the payday loan lender and the payday loan borrower.

There are payday loan laws that vary from state to state, but there are also general laws regarding payday loans that control the financial risk.

Payday loan lenders are legally required to accurately measure a borrowers’ income, not only for qualification of a payday loan amount but also for the consideration of fees and finance charges.

In addition to this, a payday loan borrower is required to understand and acknowledge the payday loan terms including finance charge and any additional fees that may occur and in what situation those fees will occur.

While it is never a good idea to borrow more money in a payday loan that you can not repay in just one paycheck, sometimes the payday loan terms can be extended so that a borrower can repay their payday loan in 2 or more payments. Again, the laws exist so that the payday loan agreement is one that a customer expresses an understanding and willingness as well as an ability to commit to.

Concerning renewals of a payday loan (including extensions of a payday loan agreement, deferrals, or rewrites of a payday loan agreement), a borrower is required to express a renewed willingness and ability to repay under the new terms.

A payday loan lender is required to limit the frequency of renewals. Legally, there is a maximum number of times a borrower is allowed to extend or rewrite the payday loan term agreement.

Payday loan companies are required to prohibit providing additional payday loans to finance unpaid interest (or other fees) or loans, either within the same payday loan company or with a different company. So in every way, a borrower can not legally borrow more money to pay off a debt of borrowed money. Both the customers and providers of payday loans are protected under these legal restrictions.

Furthermore, the governing laws of payday loans maintain a control over the frequency of payday loans that a borrower can receive, the number of payday loans a person can borrow within a designated time period.

Payday loan companies are required to establish an appropriate ‘waiting period’. This is often referred to as a “cooling off time”, from the time a payday loan is completely paid off and a borrower is able to apply for another payday loan.

Furthermore, payday loan companies are required to deny a payday loan if there is already an existing and outstanding payday loan.

Both the lender and the borrower are well protected with these legal regulations, so the financial risk of taking a payday loan is controlled.

Payday loans are a safe way to access the money you need when you need it!