Pay day loans Pennsylvania
Payday loan: A payday loan, also known as paycheck advance is a short term and usually small amount loan that is particularly intended towards any urgent requirements or needs that may arise to the borrower . Generally the amounts lent under this type of loan vary between $100 and $1500 and the duration will be normally 2 weeks. The loan will carry a high annual interest rate in the range of 390% to 900% .
How are the payday loans processed?
The procedure for the lending of payday loans is simple. Though it may vary among the different companies, generally the borrower should produce one or more of his recent pay stubs as a proof of his steady source of income. He may also be asked to provide recent bank statements . Before the approval of the loan, the borrower is required to write a post-dated check to the lender for the full amount of the loan along with the fees which can vary with the lender . Finance charges or interest will generally be from $15 to $30 per $100 borrowed for the two week period, which equals to the range of 390% to 900%, when expressed as APR (annual percentage rate) . On the date of maturity, the borrower is supposed to repay the loan . If he fails to do so, then the lender is free to process the check and acquire the amount from the borrowers checking account. In case if there is not enough money in the account to cash the check, the borrower may have to pay a bounced check fee from their bank along with the costs of the loan . In addition to this, the lender may charge additional fees and/or a higher interest rate due to the failure in repaying the loan .
Pros and cons of the payday loans: Though it may seem at a first glance, that the payday loans are actually a boon for those who are in a situation of financial emergency and have little time to wait for the long procedure involved in getting a regular loan from a proper bank, it may, on contrary, prove a curse if the borrower fails to pay off the debt in time and thus finds himself in a no win situation. The interest rates levied on the payday loans is that high, that it eventually sucks the poor borrower into a debt circle from which he just cannot get out. Thus he finds himself in a much more pitiable position than he was while taking the loan . Also, some lenders are known to employ harsh methods to collect the money back from the borrowers. For instance, the lender may choose the post-paid check given by the borrower at the time of lending as a weapon against him; in case the borrower defaults, the check will bounce, and the lender may threaten the borrower by taking him into criminal proceedings against fraud .
However, those who are in favor of payday lending argue that the payday loans are like the last straw for those who have exhausted all other alternatives and just cannot do without an urgent help, irrespective of the risks involved in it. They also argue that by carefully choosing the lender and by repaying the loan by the deadline provided, one could take full advantage of the payday loan at the same time not falling into a greater well of debt.
Regulations on the payday loans: The US Congress has approved a provision to limit the interest rate for the loans to military personnel at a maximum of 36% APR. It was after a report from the department of defense which said that an average borrower (from the military) pays back about $827 on a $339 loan, and thus termed the lending as predatory . Military officials stood up for the law, stating that the loans put the lower income group into a financial crisis. The law which was signed by the President on
Payday loans in Pennsylvania
Pennsylvania used to be one of those states in the U .S where there were effectively no restrictions or proper regulations over the payday loan lending until a decade ago. The lenders were free to lend money to the customers at whatever rates of interest they liked, which resulted in the rapid growth of such companies . The right to free enterprise was used to the fullest and in the process drove more and more customers into an ever lasting web of debt.
But that is not the case anymore. The passing of the Check Cashing Licensing Act of 1998, 505(a), made it statutorily illegal for lenders to enter into deferred deposit transactions or cash advances. After the act came to force, fast cash lending companies have either left Pennsylvania totally or have had their transactions extremely limited . The state is one among the few others to impose an outright ban on the fast cash loans, instead of restricting their functioning through placing caps on the interest rate. As no lender is allowed to lend a borrower, money in return for a post-dated check, in effect, the payday loans are forbidden in the state .
The payday loan business in Pennsylvania even without the ban imposed on the cash advance loans would have been highly unprofitable, due to the interest cap on the small loans. The Pennsylvania Department of Banking in
Alternatives to payday loans: If you are a Pennsylvanian looking for an urgent help, at the same time want to keep yourself away from falling into bigger trouble after borrowing high interest loans, there are alternate sources available. For instance, the Pennsylvania credit union association along with the state treasury department has started offering an alternative to payday loans called Credit Union Better Choice (CUBC) . The CUBC offers its customers to borrow a loan up to $500 for a period of 90 days, at an interest rate of 18% or less and an application fee of $25 or less. In addition to this, the credit unions also offer the customers basic education and information about finance . To be eligible for the loan, no credit check is required, though the customers must be either be a member of the respective credit union or conform to its membership requirements .
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