Understanding Kentucky Payday Loans
Before entering into any financial transaction, it pays to make sure you are educated about the transaction and that you understand what you are getting into. This is especially true when you borrow money and have an obligation to repay the loan.
There are a lot of different ways to borrow money, but one option that many people turn to is fast cash or payday loans. Payday loans are a niche financial product that caters to those who want just a short - term loan. Unlike a loan that you might have months or years to repay, you are typically going to have to pay your payday loan back within a few weeks or within a month. The idea behind the payday loan is that the lender spots you some cash until payday - charging you in the process.
A payday loan lender will charge you a little higher interest rate if you wish to take advantage of payday loans to pay your bills or meet your expenses. Some may see the interest rates as high but the lender is putting up a risk that you will pay them back.
When expressed in terms of an annual percentage rate (the measure of how much borrowing costs, even if you don't take a year to repay), a payday loan could have an APR of 450 or even higher. A mortgage, on the other hand, typically has an APR that is six percent or even much less. This difference makes it easy to see how expensive payday loans are. Payday loans are even much more expensive than high interest credit cards, which may have an APR of around 30 percent.
So, with these high fees, it can be easy to wonder why anyone would ever pay for a payday loan. The fact, however, is that these quick oans are available in situations when other financial solutions won't work. Those with bad credit scores who cannot get conventional loans or those who need money now and who are going to be able to pay it back soon can also benefit from the ability to take a payday loan to meet their basic costs until their next payday comes.
Kentucky Laws on Payday Loans
Because of the controversy surrounding the payday loan market, some states have imposed limitations or even total bans on payday lending. Kentucky allows lenders to issue payday loans within the state and outlines the legal rules for these kinds of loans in section 06.50.010. However, just because the loans are allowed does not mean that lenders are permitted to do anything they like.
Fast cash Kentucky lenders have certain limitations in place that are designed to protect consumers who need to take on payday loans. For example, a person cannot borrow more than $500 in a payday loan. A borrower is also not allowed to have no more than two loans at the same period of time, although there is no cooling off phase after loans have been paid back.
Kentucky addresses other factors as well including the loan tenure and the finance charges that can be assessed. When it comes to the length of the loan, the law mandates a tenure between 14 and 60 days with no rollovers.
When it comes to the fees and finance charges, Kentucky lenders are limited to charging $15 per $100 loaned out as well as a $1 fee for a database. This means that when you take out a $100 loan for a two - week period of time, you end up paying an APR for that loan that is the equivalent of 495 percent.
Staying Educated About Kentucky Payday Loan Laws
It is a good thing to impose Kentucky fast cash loan restrictions to protect those taking on payday loans. However, these laws and restrictions only go so far in offering consumer protection. Those who are considering borrowing money need to understand the extent of the legal rules and protections so they can both learn how the law protects them and so they can know what they need to do to protect their own interests.