Payday loan companies–New laws might curb rising interest rates
28th May: With the festive season approaching fast, payday loans are going to be in high demand.
Payday loans are short-term loans borrowed against any future paycheck. A payday loan has to be repaid by the borrower along with interest on the principal amount.
Growing popularity of payday loans–A typical disadvantage of such loans is its exorbitantly higher rate of annual interest. But, despite of such higher rates of interest, the US has nearly 19 million households using payday loans. That’s because payday loans offer a confidential and a quick means to solve cash problems.
High risk of payday loans—The biggest issue related with payday loans is that borrowers have the risk of getting caught in the vicious cycle. Since, majority of borrowers of payday loans belong to low or middle-income groups, so, they find it quite difficult to repay the principal amount. And, add to it the whooping high rate of interest, the total sum becomes almost impossible for them to be repaid, warn several consumer groups.
Payday regulations differ—Payday loan rules may differ from one state to another. But, there is no denying the fact that there is an increasing need for tightening regulations on payday loan firms. Aim of such loans must be to facilitate consumers and not to misuse them, states Director of CFPB (Consumer Financial Protection Bureau) Rob Cordray.
Read latest material to know payday loan rules—Consumers must take care to browse various additions by state and federal governments for regulating payday loan industry. From time to time, the federal government has been introducing various legislations aimed at making the process of payday loans more transparent and effective.
Apart from federal regulations, several commercial banks also tightened rules governing payday loans to bring down profit margins.
Crackdown on payday loans could popularize online payday loans–Meanwhile, several critics allege introduction of tougher laws governing US payday loans might compel consumers to go for online payday loans. It is being felt that the so-called regulated online payday firms are no better. They are known for violations of laws, apart from charging unauthorized rates.