Payday loans or Cash advance loans are one the fastest growing loan product in the United States. There are over 10000 registered payday lenders across the country. With a double digit rate of growth, these loans have essentially become a part of financial life of an average middle class American.
Payday loans are meant for satisfying short term financial difficulties. The loan application process is very simple. An individual can simply walk in to a payday store or can apply online over the net. The lender conducts basic sanity checks on the application. Once the application passes these checks, he becomes eligible to borrow the payday loan as per his financial assessment. The basic qualifying criteria include applicant being a resident of the United States and into a legal job for more than 90 days under the same employer. It is important to have a bank account while some lenders require a minimum monthly salary of $1000.
Payday loans are meant for satisfying short term financial difficulties
In Hawaii, these loans enjoy a legitimate status. Most of the prominent lenders have their presence in Hawaii. Some of them have a referral scheme where they pay an incentive of $25 for each family member who applies and takes a payday loan from them. This has resulted in word of mouth publicity for these lenders. The legislation has made sure that such lending institutions do not end up exploiting the customer hence they have added various provisions over this business.
Some of the important provisions around payday lending in Las Vegas as are follows:
- An individual can borrow up to a maximum of $600 as a loan amount.
- The highest loan period has been restricted to 32 days. A person cannot borrow money for a term higher than it and has to close the loan by this period.
- The maximum finance rate and fee has been capped by the legislation is 15% of the loan amount. Hence for a 14 day payday loan of $100, APR works out to be 459%.
- A borrower can have only a single loan outstanding at any point of time. Taking multiple payday loans or trying for a parallel loan with multiple lenders is strictly regulated.
- A borrower cannot rollover his existing loan. As per the mandate, the loan account has to be closed completely by the end of its term. The regulation has also disallowed any kind of consolidation or refinancing of the loan.
- A lender can levy a maximum of $20 as Non Sufficient fund fee in case of any default by the borrower.
- A lender cannot initiate any type of criminal proceedings against the borrower. Exception to this rule are the cases where the maker has applied a stop payment to the repayment check or has closed his bank account leading to the bouncing of this check.
- In case of any breach or dispute, an individual can approach the Hawaii Department of Commerce and Consumer Affairs
It is important for an individual to understand the need of taking a payday loan. Few points one should ponder upon before making an application for this loans are as follows.
- These loans are a strict no for taking care of any non-essential purpose or any impulsive purchases.
- An individual may get a higher loan amount approval based on his income etc. But only the actual amount which is required should be borrowed.
- A good financial planning around the repayment should be done. It is critical to have a payment plan before a borrowing plan.
- Other alternatives to money should be considered. An individual can try and borrow money from friends or family; trying to approach various creditors to defer their payments or request any cool off period for some time; approach a bank and apply for a regular loan which is cheaper than the payday option.
- Similarly, a monthly budget and savings plan should be worked out which will slowly build corpus for similar emergencies in the future.
- When there is no choice but to take a payday loan, adequate shopping should be done to various lenders and finalize the one with cheapest loan or easiest loan payoff options.