Payday Loans
Have you heard the radio or television advertisement for a payday
loan? Do you know what a payday loan is and what the cost is for
having one? A payday loan is when a company advances you money
and you, in return, write them a postdated check for your next
pay period in order to repay the loan. Generally, the companies
use similar requirements. They are:
- You must be employed full-time for at least six (6) months.
- You must have a current valid state ID or drivers license.
- You must have an opened checking account at an Indianapolis
area bank with at least a $1 balance.
- You must have a utility bill in your name at your current residence.
- You must have a working telephone at your residence.
- You must have a bank statement dated within the last thirty
(30) days.
- You must have at least two (2) recent paystubs.
- The loan must be repaid in fourteen (14) days.
The companies require that you repay the loan in fourteen (14)
days. If you do not repay the loan in fourteen (14) days, these
companies will charge you an additional fee to extend the loan.
The fee depends on the loan amount. Each company has different
rates but they range from $7.50 per week to $30.00 per week. When
you extend the loan, the weekly fees are not applied to the balance,
but are added to the balance. The biggest drawback to these loans
is that they are very expensive.
Because these are loans, the company is required to give customers
a truth in lending statement that will tell them their annual percentage
rate and the amount they will repay including the interest. The
interest rate depends on the amount of the loan. The more you extend
the loan the higher the interest rate. The interest rate can range
between 391% to 786% or higher.
There may be better alternatives to these types of loans. If your
budget is tight, it may be better to increase your income by way
of part-time job. There may also be ways that you can cut your
expenses so that loans aren't needed.
The above information should be understood to be a general
discussion of the subject matter and DOES NOT constitute
a legal opinion about the situation. For further information
please consult a qualified attorney.
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