About Payday Loans and It’s History

“I have a best payday loan, and I’m not sure if it’s right for me.” That one question has been asked more times than I can count by people who are desperate for answers. The fact that you’re even asking this question means you’ve already made some type of bad decision on your own. The only thing worse is when someone tries to tell you what the answer is before you know how to ask the right questions. 

With all of the negative press of best payday loan surrounding these financial services, there are plenty of myths floating around out there about them. I’ve heard it said from many people that they’re illegal, predatory lenders. I’ve also heard that they’re a great way to get money fast for emergencies. Both statements are false, but what is true is that every state regulates payday lending differently so each lender operates in their own industry. 

In an attempt to help you make better decisions, I thought it would be helpful to break down the basics of the payday loan process. After reading this article, you’ll be able to talk with anyone who asks you about payday loans without having any fear that you don’t understand the subject matter. There are five main points I’d like to address, but first let me give you a little history lesson. 

Payday Lending Has Been Around Since the 1800s 

These short-term cash advances were originally created as a tool to offer immediate access to credit to those who needed it most. The problem was that the people receiving these loans often ended up paying much higher interest rates than they would have paid if they had saved up the money themselves. 

This led to another innovation – the installment plan. This allowed consumers to pay off the loan over time at lower interest rates. As the market grew, the number of companies offering these types of products increased. In order to protect consumers from shady businesses, states began implementing laws regulating the payday lending industry. 

The U.S. Congress passed a law in 1974 that required payday lenders to follow federal regulations. These rules included caps on maximum amounts and minimum payment periods. However, state legislatures soon started passing laws that limited the scope of these federal regulations. By 1996, all 50 states had enacted legislation limiting the amount of money that could be borrowed and the length of time it could be repaid. 

How Does It Work? 

There are two main types of payday loans: “rollovers” and “direct” loans. A rollover loan allows customers to pay back the principal and interest due within a specific period of time. If the customer pays back the principal and interest in full within that allotted time, he or she will receive a refund equal to the remaining balance of the original loan. 

If the borrower fails to repay the principal and interest within the specified timeframe, however, he or she can end up owing additional fees. Direct loans allow borrowers to borrow funds immediately and do not offer a rollover option. 

The cost of direct loans is generally higher than that of rollover loans because the consumer must pay a larger percentage of the total amount of the loan upfront. Because of this added expense, direct loans tend to carry higher interest rates than rollover loans. 

What Makes Them So Popular? 

People use payday loans for a variety of reasons, including emergency situations (such as car repairs) or unexpected medical bills. For those looking to borrow cash quickly, however, these services are especially popular. Many people use them simply because they need quick access to cash. 

While the majority of people who use payday loans are honest individuals trying to avoid expensive overdraft charges, there are others who take advantage of these services. Some people may apply for multiple loans and never intend to repay them. Others may try to stretch out repayment dates as long as possible. 

It’s important to note that payday lenders cannot legally charge excessive interest rates. They are regulated by the Federal Trade Commission (FTC). The purpose behind this regulation is to ensure that consumers have the same opportunity to seek alternative forms of financing. If a business is operating outside of these guidelines, its practices could result in legal action. As such, it is often considered best practice to shop for a lender who follows FTC guidelines. 

Where Do People Get Them From? 

You probably remember the days of going to the bank and writing a check for thousands of dollars. Thankfully, we no longer live in an era where a person needs to rely on a stranger to lend him or her money. Today, most consumers turn to payday lenders instead. 

When seeking a payday loan, look for lenders who operate in your local area. Local banks and credit unions usually won’t have the ability to provide you with the same high-interest rates that online lenders can. In addition, it’s easier to shop for a direct lender than it is to shop for a bank or credit union. Online lenders offer instant approval, which is ideal for those in a hurry. 

Once you find a company that meets your needs, request a free copy of their loan agreement. Read through the terms carefully and contact the lender directly to confirm the following: 

  1. How much cash the lender will advance you 
  2. What interest rate your lender will charge 
  3. When you’ll be expected to repay the loan 
  4. Whether or not the loan is secured by collateral 
  5. What fees will be charged if you fail to repay the loan on time 
  6. Whether or not you will be charged late fees 
  7. Exactly how long you have to repay the loan 
  8. Who owns the debt if you default 
  9. How long it takes for the lender to report the loan as delinquent after you stop making payments 
  10. Any other information pertinent to the loan 
  11. Your rights under the Consumer Credit Protection Act 

With these guidelines in mind, you should feel confident enough to tackle anyone who asks you about payday loans. Now go out and enjoy life! 

Conclusion

So payday loans are around for centuries now and the loans are giving people a lot of benefits from buying cars to houses and repaying it when your paycheck comes the next month in form of interest,  it is relatively very old but a trusted loan service and it is been since the people were asking to lend to strangers they meet but payday provided that time with a good bit of guidance back in those times.