FAQ: Payday Loans
In the United States (and I imagine in other countries too) there is this type of predatory lending where the person charged through interest and fees over 300% annualized interest. Here goes some information on these loans, thanks to the Agency Business, Transportation and Housing of the State of California:
What is Payday Loan?
The payday loans “also called” cash advances “or” deferred deposits. ” In a payday loan, a borrower writes a check to a lender in exchange for a cash loan short term.
For example, a borrower writes a check for $ 300, pay a fee of $ 45 and get $ 255 in cash. The lender does not cash the check until the next date for payment of salary of the borrower, up to 31 days.
Costs for payday loans:
Under California law, the maximum amount that a consumer can borrow on a payday loan is $ 300. The maximum fee that the lender of a payday loan may be charged is 15% of the nominal value of the check (up to $ 45). Additional restrictions on fees for members of the military and their family dependents.
The cost is equivalent to an annual percentage rate (APR) of 460% for a two-week loan. The actual annual percentage rate may vary depending on the loan. APR is the total annual interest rate a borrower pays on a loan, including all costs and charges. The annual percentage rate is used to reveal the total cost incurred to borrow money. For example, a loan to buy a new car can have a 4-7% APR.
If you get a payday loan:
Borrow only the amount you can pay in full at the next date for payment of his salary. On the date of maturity of the loan, some borrowers realize that they can not repay the loan. We encourage borrowers not to request a second loan from another lender of payday loan to pay the first, as this may lead to a vicious cycle of borrowing would be difficult and expensive to recover. Nor do business with any payday lender strangers over the Internet.