The law protects you from getting caught up in payday loans!

It's ironic that those who most need money are usually the last ones who can get it. Lenders take a risk every time they make a loan, so they have to charge more interest to those who are less likely to repay. Payday loans face stiff criticism because of their extremely high interest rate and their dubious collection practices. Here are some ways that payday loan laws can protect you.

• Payday loans almost always have a short term, ranging from two weeks to one month. The loan is supposed to be paid for entirely with the borrower's next check, but due to the aforementioned high interest, they usually have trouble repaying and are forced to roll the loan over. Payday loans border on predatory lending, but they can be a viable source of cash for those with no credit.
• Georgia is the only state in the US that expressly forbids payday lending. Other states don't legislate specifically on payday loans, but their statutes put limits on interest charged on short-term loans, virtually forcing out these lenders. These states include Connecticut, Maryland, Massachusetts, North Carolina, Pennsylvania, Vermont, West Virginia, and DC. In NY and NJ, interest rates on short-term loans are capped at 25%- far below the triple digits that most payday lenders charge per annum.
• Thirty five states allow payday lending outright, or their laws are very lax. Where these states have interest caps, the annualized rate can be up to several times the original loan amount. In MO, the APR can reach 1955% on a loan of $250. Other states such as Delaware, Idaho, Nevada, SD, Utah and Wisconsin have no limits on the interest rates charged by payday lenders.
• Federal law to cap interest rates was introduced in 2009. The Protecting Consumers from Unreasonable Credit Rates Act attempted to cap the APR on short-term loans at 36% nationwide. According to the CRL (Center for Responsible Lending), this is a reasonable cap that will help borrowers break the cycle of debt and also remove some of the tarnish from the payday loan industry's reputation.