It is not uncommon to see people falling in the debt trap for which payday loans are famous for. There have been many cases in which people who initially took payday loan of $200 paid more than twice of it in return. A lot of people who have not been able to return the payday loans within the allotted time frame prevent taking them and also tell their friends and family the same.
Fearing payday loans is important because the rate of interest applied on the small amount borrowed is a lot. If you are able to return your payday Loan by your next pay date, you will only pay a certain amount additional to the principal amount borrowed. The extra amount that you pay is the rate of interest that is applied for 15 days. The rate of interest applied on payday loans vary from one state to another.
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This is the main reason for which government has changed the laws and regulations governing payday loans. They have made very strict changes that will guard the innocent people who are applying for the payday loans for the very first time. Not only the rules and regulations imposed by the government are to secure the interest of general public but it is also in the favor of lenders and also provide them with the security of reversal of their money within the allotted time frame. The government has made very strict laws for loan providers to ensure that the person borrowing money is capable of returning it by his next pay date. The lender is supposed to check the total expenses of the person for that particular month as well as calculate his salary to afford his general expenses. He should also calculate whether or not a person borrowing money will be able to repay by his next salary date. This is of-course is a serious blow to the business and earnings of loan providers but definitely works in the favor of both.
If the lenders are sure about the return of the money they will definitely earn through the rate of interest that the imposed on the amount loaned and on the other hand the borrowers will get the security of not falling in a debt trap.
These rules have been created looking at the trend of payday loans and the borrowers. A lot of people were being misused and miss guided by the lenders as well as were not aware of the high rates of interest charged by them. A lot of people due to this reason repay much more than the actual amount loaned initially. This was the primary cause that the popularity of payday loans was falling. The latest action of government in different states promises the general public that they will not be cheated by lenders as well as it is making them more informed about the rate of interest that is applicable in their respective states as well.
General people can take a sigh of relief knowing that their interest is guarded by the government. The lenders are also able to get business and easy reversal of money. So next time you are in the market to take payday loans you don’t really have to worry about being cheated. All you need to do is read the documents provided by your lender carefully and understand the rate of interest applied as well as the total amount that you will be paying when the loan term finishes.