Laws on Lending Payday Loans in the United States

Payday lending has grown into a multi-billion dollar industry in the United States. Studies show that it contributes approximately $40 billion to the American economy. Because of the profitability of payday lending, many businesspeople are venturing into the business. As years go by, more lending outlets and online cash advance websites are put up to cater to the demand for payday loans.

Their hassle-free application policy gives them a good advantage over banks and credit card agencies. Because of this, most people prefer borrowing money from them. As long as you are a legitimate employee with a steady stream of income and a working bank account, you can guarantee approval of your application. Banks and credit cards check your credit history before giving out your loan, but lending companies do not.

Companies typically grant loans ranging from $50 to $500. They expect borrowers to pay the total amount of incurred debt within a two-week period. The due date of payment is set right on a borrower’s payday to make sure that the borrower will have enough cash on hand to pay for the debt.

Extension policies give a leeway for debtors to obtain adequate funds for the payment of their cash advance. Through this, they can delay their payment for another two weeks. However, lending companies charge additional interest rates for the deferment of payment. Hence, the basic cost of interest rate doubles or triples, depending on how far the due date is moved.

These rules seem to favor the clients and borrowers of cash advance payday loans. Even so, it increases the total amount of incurred debt. This makes payday lending a highly profitable venture. The interest rate basically serves as the business earnings. As long as clients cannot return their initial loan, lenders can yield a higher profit for each rollover and back-to-back transaction.

State governments implement laws to regulate the power of payday lenders in the country. Every state has distinct provisions for those who are lending cash advance payday loans. For example, in North Dakota, borrowers are given a maximum of 60 days for the entire duration of their loan.

The loan duration gives the clients enough time to obtain funds without being charged with additional interest rates. This enables clients to pay cash advance payday loans that is close to the cost of initial loan transaction.