A payday loan is no different from a typical personal loan, as it requires repayment, associated interest charges and related fees, and a repayment schedule. Therefore, payday loans have terms and conditions of which borrowers must be aware; in particular, borrowers of payday loans have rights just like they would any other type of loan.
It is therefore up to you to understand your legal rights before taking out a payday loan.
Understanding the Strict State and Federal Regulations
It’s no surprise that there have been strict regulations on both the state and federal level regarding payday loans. Although this legislation was enacted to protect individuals from shady or disreputable payday loan companies, some of the new laws have prohibited individuals from obtaining payday loans.
In any case, the regulations will differ from state to state, so it is in your best interest to educate yourself on your state’s rules and regulations regarding payday loans before you being the loan process.
For example, states have different laws regarding the maximum amount of money you can take out for a payday loan. Your state may also limit the fees which can be charged by the payday lender, as well as the interest rate charged by the payday lender.
Maximum loan amount and maximum interest rate
It is also important to understand that, just because a state sets a maximum loan amount or maximum interest rate amount, a payday loan company does not have to abide by that. Although the maximum amount must be adhered to, the payday loan company may very well impose lower maximum loan amounts or charge lower fees and interest on their loans.
In other words, it is still important to make it a point to understand each payday loan company’s terms and conditions regarding their payday loans.
Understanding the Loan’s Terms and Conditions
If you want to take out a payday loan from a payday lender and the loan’s terms and conditions are not clearly explained in the contract then it is best to not sign the contract until a written explanation of these fees is provided to you.
Another consumer right regarding payday loans is that the payday loan company must provide the consumer with a timetable and repayment plan before the consumer fills out the loan application. This protects the payday loan company, as well as yourself, as all repayment terms are clearly explained before the loan has been secured.
Understanding the Loan’s Repayment Terms
In addition to the loan’s repayment terms, the payday lender will also need to provide you with the penalties imposed if you fail to repay the loan as outlined in the loan’s repayment terms. It is important to understand the company’s rights regarding collecting the money that is owed them.
Perhaps the best initial step to take when applying for a payday loan is to review the loan’s terms and conditions, as well as the company’s rules and regulations, even before you start the application process. All reputable payday lenders that abide by all state and federal laws will have these terms and conditions clearly outlined, either on their website or in their loan application paperwork.
If you are unable to locate this information, and if you are unable to clearly understand the terms of the loan, it is important to not enter into any type of agreement with the payday lender.
Understanding that both you and the Lender Have Legal Rights
In addition, it is perhaps just as important to understand the payday lender’s rights regarding your payday loan, so that you have a clear understanding of the ramifications if you are unable to successfully repay the payday loan in the agreed upon time frame.
We all have options when it comes to obtaining credit or loans of any kind, and that includes payday loans. In order to make an educated, informed decision regarding a payday loan, you must have all the necessary information at your disposal, as this will ultimately protect you in the end.