Introduction

Hamlet was written by Shakespeare over 400 years ago. This play’s famous line is “Neither a borrower nor a lender be.” Today, lenders and consumers are able to borrow. In today’s world, it’s not uncommon for people to borrow money and for lenders to lend. Payday loans may also be available to you.

Payday loans are available to help borrowers get quick cash. In the 1980s, the first payday loan shops were established in the United States. This is a comparison of the number 4 Starbucks stores in the United States. This was slightly lower than the 14,027 McDonald’s restaurants which were open that year. It was easier to get online payday loans thanks to the internet. Get a loan instantly at Bridge Payday.

What are Payday Loans?

Payday loans are an option to financial services. These loans can be used to quickly pay unexpected bills or for emergency cash. These unsecured loans can be used to pay for short-term expenses or to help with monthly bills. Borrower is responsible for paying the entire amount and fees when they pay their next payday.

The average loan amount is $500. It is due within two to four weeks. 6 The terms of the loan vary depending on income received and borrower’s schedule. It could take one, two, or one month. The consumer who pays less frequently in a given month might be able to borrow more money than those who pay monthly.

Online payday loans are the same structure as storefront loans. All communication is done online, however.

Obtaining Payday Loans

A payday loan is available to anyone without a credit score or a collat . 9 To get a payday loan, borrowers don’t need to have strong credit or a high score.

  • An account at a bank, credit union or pre-paid card company.
  • Documentation of income or proof that it was earned from a job or other source.
  • Valid identification
  • At least 18 years must be provided as proof of age.

Payment Plans Options

Payday loans can be repaid in a variety of ways. Borrowers will need to provide a postdated check. The borrower will receive a check for the total amount borrowed as well as any fees or interest. The check will be held by the payday lender until the borrower pays off the loan due date. If the borrower does not return to the shopfront to arrange to pay the loan, or renew it, the lender can cash the check. Due to the excess, the borrower may be charged a fee for a bounced check . The loan will not be paid if it isn’t paid. If the default is not rectified, lenders can sue the borrower.

The borrower can also give permission to the lender to electronically access his/her bank or credit union account. Direct deposit of the loan amount into the account. The lender cannot withdraw additional fees if the borrower renews the loan. This allows the lender to pay the loan payment before the borrower pays his bills or other expenses. Payday lenders might offer payday installment loans that have a longer repayment term. They may also allow the borrower authorization to withdraw multiple payments electronically from his bank account. 11

Prepaid debit cards are a great way to get a payday loan. A prepaid debit card that can be reloaded can be used for financial emergencies. This is particularly true for people who are less educated or have lower incomes than the rest of society (Figure). 12 Unbanked borrowers don’t have traditional bank accounts or credit unions. Underbanked consumers have a bank account but also use other financial services like payday loans. When payment is due, the lender electronically debits the amount from the prepaid card.

Calculating the cost

Payday loans can be expensive. Borrowers pay an average of $9.3 billion each year in payday loan fees. Borrowers pay an average $55 per two-week loan in payday loan fees. Recurring borrowing will result in $520 of fees. The federal Truth in Lending Act gives valuable information to borrowers regarding the cost of borrowing. Before a borrower agrees to a loan agreement, the lender must disclose the costs of payday loans to them. Due to their fee-based structure, payday loans can be more costly than traditional loans. Payday loan lenders are required to disclose the cost of payday loans, including the finance charge (fee) and the annual percentage rate (APR). Consumers can compare payday loans to other borrowing options by using this information. Calculating the APR involves comparing the interest and fees charged on the amount borrowed and the amount for a 1-year period (see “Calculating Payday Loans”).

Who uses Payday Loans

Payday loans are used by 12 million Americans each year. 15 These loans are often used by payday loan companies to cover unexpected or urgent expenses. 75% of borrowers borrow loans to cover basic expenses such as rent or utilities. It is not surprising that 7 of 10 borrowers take out loans to pay for basic expenses such as rent or utilities.

Payday lenders prefer to locate their stores in areas that cater specifically to a certain segment of the population. Payday lenders will be more inclined to open stores in areas that have higher poverty rates, lower incomes and/or are home to minorities. Payday loan borrowers don’t have an average education. 17

Payday loans are often needed by people to cover their financial obligations. 18 Those with poor credit are often unable to get traditional loans.

State Regulation

History has seen state laws regulate payday lending. Each state has its own regulations. Understanding payday lending can be complicated due to the many variations. Payday lending is banned in 17 states and District of Columbia. These states have either chosen to not regulate payday loan interest rates or exempt them from the laws.

23 Every state has its own regulations. These regulations cover issues like repeat borrowing, waiting between loan payments, loan limits, and loan terms. Payday lending is not available in all states. There are many variations in how much it costs to borrow money. Similar fees may be charged by lenders in the same state, usually at the maximum allowed by law.

Federal Regulation

Payday loans are a common option for military personnel. For example, in 2017, 44 percent of military personnel were able to get a payday loan. This compares to only 7 percent who get these loans. The Military Lending Act was expanded in 2015 and enacted by 2006 to protect active duty military personnel from high interest rates. In 2006, the Military Lending Act was passed and expanded in 2015. Payday lenders cannot charge active-duty military personnel more that 36 percent interest on payday loans and other loan products.

The Consumer Financial Protection Bureau (CFPB) was established by the Wall Street Reform Act (also known under the Dodd-Frank Act in 2011). 25 Their mission is to strengthen federal consumer law enforcement and expand consumer protection regulations. 26 It is the task of the CFPB to recommend and develop new federal regulations. It continues to review and evaluate payday lending practices. The committee welcomes comments from the public as concerns arise. Access to credit for consumers is one of the major considerations. Consumer protections from harm caused by lenders’ payment practices are another concern. Kathy Kraninger, Director of the CFPB, stated in February 2019 “… I look forward to working with other states and federal regulators to encourage robust market competition and improve credit access, quality, and cost for consumers.

Conclusion

You can get fast cash with payday loans. Payday loans can be a single source of funding for some. Many people choose payday loans. Payday loans are a problem due to their structure, high renewal rates and loan sequences. This can lead to a cycle in debt. While payday loans are not allowed in all states, some are heavily regulated in others. Borrowers of payday loans must be well aware of the risks and avoid taking on credit that they cannot afford. Borrowing is costly if you don’t have the right knowledge.