Payday Loans

Payday loans are the loans taken for a short period of time. These loans are offered for covering your expenses till your payday. The payday loans usually range from $100 to $500, and you will get only two weeks time for your repayment. The interest rate of the payday loans are exceedingly high, it is something around 400% APR. This means you will have to pay an interest as high as $15, if you take a two week loan of $100. You can also call these loans as the ‘cash advances’. This term is sometimes also used for credit cards.

Controversy about the Payday Loans

Some critics say that the payday lenders exploit the financial weakness of needy people for having big profit margin. They tell that these lenders always make the poor and young people there target. According to the critics, the main confusion is that the borrowers are never provided the opportunity to come out of the debt cycle. They have to renew repeatedly once in every two weeks until they are paying back their principal. The critics also own a view that the payday lending procedure is meant just for the poor and not he middle class, as the middle class make most of their payment through credit cards.

Legal Aspects of the Payday Loans

The Payday lending process is certified by the state laws in thirty seven states of America. This process is only permitted for the licensed lenders. Two territories and twelve states have not gone through authorizing legislation for pay day lending certification. Though Arkansas Constitution restricts the rates of loans to the consumers at an annual interest of 17%, the Arkansas ensure authorizing high payday loans.

In Maine the supervised lenders has the authority to start a structure permitting a limited amount of payday lending. This is done in spite of the fact that Maine does not have industry legislation. Columbia repealed the laws related to payday loans while Oregon restricted the rates at a much lower level compared to the usual amounts. So, the payday lending procedures are different in different states.