SPLASSSSSHHHHHH!
You just see your water supply pipeline in your house burst and streams of water coming out from everywhere. You have cut the water supply for now but you can’t stay on like this for long. Out goes a phone call to the local plumber asking the cost of repair. “It won’t be repaired Sir. It has to be replaced”, he says. What do you do now? The estimate of replacement is over $500. It is the middle of the month and you are having only $150 in your bank account. You have other pending bills for the month. What will you do? How will you arrange this money at such a short notice for something you cannot delay?
The situation above can happen to any of us. It may not be in the same form but can come to us through a broken car or urgent medical bill or something else where you are required to pay immediate cash right in the middle of the month. To douse the financial fire, there is an alternative of taking a Payday loan. This is a short term unsecured loan meant to cover any financial emergency like above and you are required to pay off only by the next paycheck date.
Such loans do come at a cost in the form of a high interest rate. There are many other charges involved in case you are not able to pay it off on time and require a roll over to next month and on-wards.
Online Payday loans has been regulated by the legislation so to save the interest of the borrowers. The legislation has fixed the rate of interest of 2.75% per month which translates to 33% per annum beyond which a lender cannot charge the interest. This effectively makes the payday loan charge at par with the standard bank and hence in actual terms, the high interest rate lending can be considered as prohibited. This works in the interest of the intended borrowers who are safeguarded against any exploitation. In case any borrower sees some institution breaching the norm or gets charged with a high interest, he can go and complain with the Maryland Commissioner of Financial Regulation.