Delaware Payday Lending Laws & More
From an unexpected trip to the emergency room to car repairs to putting food in your family's mouths, there are many different situations that may require you to need cash immediately. Today, many workers are struggling with less hours and reduced pay, making it harder to get by. Living paycheck to paycheck has become the norm for a lot of people, and any unexpected, emergency expense can be crippling financially. That is why payday loans have become so popular.
Payday loans are short - term loans that give borrowers fast and easy access to small amounts of cash, usually up to about $500. This is generally why they are often called fast cash loans. The borrower writes a check to the lender that is future - dated to their next payday for the loan amount plus the interest and service charges. In exchange, the lender hands over cash immediately and hangs on to the check until the end of the repayment term, which is typically the borrower's next payday. When that day comes, the lender cashes the check to pay off the loan.
The upsides to payday loans include:
- Fast access to cash in emergency situations
- Quick application process, not a lot of paperwork to fill out
- Easy approval for working people
The Risks of Payday Loans
Make no mistake about it - payday loans, or deferred deposit loans as they are sometimes called, do fulfill a very important need for a lot of people. There are times where individuals find themselves in need of quick cash infusion to cover a serious expense. In these situations, a payday loan can really be of great use. However, there are risks and drawbacks to these short - term loans.
The biggest issue with payday loans is that they carry incredibly high interest rates and service charges. Because these loans are compressed and very short term, the interest rate and finance charges are compounded and are very high when you calculate them to an annual percentage rate. On a two - week payday loan, the interest rates can work out to an APR of well over 400%.
The other issue with payday loans is that people tend to get hooked by them. While a payday loan can be a very helpful stopgap in a tough financial situation, they often worsen the cycle of debt people find themselves in, leading to the borrower to take out one loan after another after another.
Delaware Payday Loan Laws
Each state has its own laws regulating payday lending. The laws are designed to protect borrowers from abusive, predatory practices from lenders.
In Delaware, the payday loan industry isn't regulated as tightly as it is in some other states, but there is new legislation aimed at limiting these short - term cash advance loans.
In June 2012, the Governor of Delaware signed a new law that was designed to reduce people's dependency on payday loans. Under the new law (House Bill 289), those borrowing using Delaware fast cash loans are only allowed to take out 5 loans of up to $1,000 in any 12 - month period. This includes rolling over or refinancing existing payday loans. Now, the state can track how many payday loans an individual has taken out.
Other important points to know about Delaware's payday lending laws include:
- The maximum term of a payday loan is 60 days.
- There is no limit on the interest rate that lenders can charge.
- The maximum amount for a payday loan is $1,000.
Understanding payday loan laws can help you be more informed should you decide to take out such a loan. It is important that you know your rights as a borrower and that you fully understand exactly what you are getting into before you agree to take out a payday loan.
Stay Current on Delaware Payday Loan Laws
Of course, with the state's recent updates to payday loan laws and continued push to curb this practice, the fast cash Delaware landscape is always changing. Stay up to date on the latest laws and regulations by checking this page regularly.