Everyone has had the same problem at one point or another; more month than money. If you are in need of a payday loan or short term loan there are some things you need to know about this type of cash advance loan to get the best deal and avoid any problems with the lender or your credit.
Payday loan companies are subject to federal and local lending practices laws that protect both the lender and the borrower. It is therefore important to know the laws in your area regarding short term loans. California payday loan companies, for example, have some of the strictest regulations to protect borrowers in the nation.
In California a person seeking a cash advance can only borrow $300 in advance of their pay day. The California Pay Day loan company can only charge 15% of the face value of the loan amount and may not cash the check the borrower is borrowing against until the agreed upon pay day. The APR or annual percentage rate for these short term loans are in excess of 400%, by comparison a car loan’s APR is between 4% and 8% or a home loan averages 3%-7%
It is advisable to only take a cash advance or payday loan if you are confident you will be able to pay the loan in full on your next pay day. Many people take out loan after loan to pay off a series of payday loans only to default on all the loans when the original loan’s interest balloons 400% or more. It is also prohibited of California Payday loan companies to allow the borrower to take out a second loan to pay off the first loan.
Military members and members of their immediate families are also offered further protections under California state law to protect them against predatory short term lending practices. The fees that may be charged to a member of the military in California are less than the general public and there are greater restrictions on the loan company’s collection abilities as well. Many California payday loan companies are refusing to extend cash advance loans to members of the military because of these restrictions.
If you have taken out a payday advance in California and find yourself unable to pay the loan back on time it is better to alert the payday loan company in advance of their submitting your check to cash. If you neglect to contact the lender and your check bounces the loan company is only allowed to collect a $15 insufficient funds fee. While contacting the loan company won’t avoid a fee or penalty on your loan it will avoid additional bounced check fees from your bank. Additional fees cannot be charged if you request an extension of time or payment plan. However, the payday lender is not legally required to grant your request for an extension. Remember that under California state law it is illegal for the lender to create a second loan to pay off the first loan so you will have to either find another lender or seek a different type of loan to avoid fees and interest.