Understanding Colorado Payday Loans
During hard financial times, many people turn to payday lending to make ends meet. Payday loans are short - term loans that give borrowers access to instant cash to be repaid on their next payday. The process involves the borrower providing the lender with a post - dated check for the amount of the loan plus fees and interest charges. In return, the payday lender gives the borrower instant cash, and at the end of the loan term (on the borrower's next payday usually), the check is cashed and the loan paid off.
Speed and convenience are the key advantages of payday loans. For someone who has found himself needing a little extra money before his or her next paycheck arrives, a payday loan can be a viable option. This is especially true in emergency situations where someone needs cash fast to avoid a disastrous situation.
However, while fast cash loans do serve a very important purpose, they are not without their drawbacks and dangers. The biggest issue to be aware of is that payday loans have incredibly high interest rates. For example, a short - term, six - month cash advance loan in Colorado can have an interest rate that works out annually to nearly 160%.
That is why borrowers need to be very careful and judicious when taking out payday loans. These loans should only be considered as a true option in emergency situations where cash is absolutely needed to avoid a big problem. And even then, it is important to consider all options before choosing this method of lending.
Colorado Payday Loan Laws
In Colorado, payday lending is heavily regulated. Legislation was passed in 2010 that put new limits on Colorado fast cash loans in the state. The new law eliminated the old payday lending model that had repayment terms as little as two weeks, instead instituting a minimum loan term of six months. As a result, the payday loan industry has seen a sharp decline in the state, with the number of these lenders declining 14% in 2011 and the number of loans they granted going down by almost 60%.
In 2011, 444,333 payday loans were taken out across the state. By the end of the year, nearly 150,000 of these loans were outstanding. The average payday loan in Colorado was $375.45 with an average finance charge of $236.99 - an average contracted loan term of 188 days and average contracted APR of 191.46%. There were more than 350 payday - lending stores across the state, which was down from over 400 in 2010. Additionally, the average monthly income of someone who took out a cash advance loan was just under $2,500.
The following are some key points about Colorado payday loan laws:
- The minimum repayment period is six months.
- There is no maximum loan term.
- The maximum amount that can be borrowed with a payday loan is $500.
- The maximum finance charge on a payday loan in Colorado is 20% for the first $300 loaned and an additional 7.5% for any amount that exceeds $300. Lenders can also charge a 45% yearly interest rate plus monthly maintenance fees after the first month has passed.
The recent changes to payday loan laws in Colorado were designed to help lower - income workers who were often crippled financially by the high interest rates of these loans. The goal is to make payday lending accessible to those who need it but to limit the amount of interest so that borrowers don't get too far in debt.
Fortunately, the state realizes that payday loans can fulfill a very important need for some individuals. Financial emergencies do arise for many people, requiring a quick infusion of cash to make ends meet. Having the ability to take out a payday loan can be helpful for those in dire need.
Of course, fast cash Colorado loan laws are always subject to change, so it is important that consumers stay informed.