The Truth about Michigan Payday Lending
If you are considering borrowing money from a fast cash lender, you need to understand the costs associated with doing so. A payday loan is a financial product with many benefits associated with it and it serves a unique niche market for quick loans. However, there are tradeoffs and you need to do a careful cost/benefit analysis to make a decision about whether the tradeoffs are worthwhile.
When making your choice, consider the costs first so you can determine if the benefits outweigh them. The costs of taking a payday loan are literal costs: you pay money for the loan. In fact, you pay a lot of money. When you borrow through a payday lender, you pay a fee for taking on the loan, which can vary by state and by lender. The fee, when expressed in terms of an annual percentage rate (APR) is as much as 450 percent. Of course, you aren't going to take a year to repay the loan but knowing how high the effective interest rate is should make you think very carefully before you decide to take on a payday loan.
When you are making the choice about whether to borrow using a payday loan, you thus need to weigh this high APR and the high fees that you pay against the consequences of not taking the loan. If it is worthwhile to you to pay the fee so that you can do something important with the money, then it makes sense to take a payday loan.
For example, if your electricity is going to be shut off and it would cost you $50 to have it turned back on but you can take a payday loan for $15, then it makes a lot of sense to take the payday loan and to pay your electric bill. If you need your car to get to work and you need money to repair it, then it makes a lot of sense to get a payday loan. Just be sure to evaluate your expense and make sure the cost of the loan is worth it.
Michigan Laws on Payday Loans
As a result of concerns about payday loans, states have started to regulate the way that payday loan lenders do business. These regulations take a lot of different forms and are designed to provide various protections for the consumer. For example, to understand the Michigan fast cash laws, you can review the relevant code section, which is found in Mich. Comp. Laws section 487.2121.
Some of the key provisions of the Michigan laws related to payday loans include limits on the loan amount; the loan tenure; the fees and finance charges; the maximum outstanding loans you can have at one time; and the repayment plan.
The rules limiting loan amount, for example, mandate that no loan can be issued for more than $600. There is also a rule indicating that a debtor can only have one outstanding loan at a time and that no rollovers are permitted. The tenure of the loan may be up to 31 days.
As far as the loan itself goes, a lender is allowed to charge 15 percent on the first $100 that is loaned out. For the second $100 loaned out, the lender is allowed to charge only 14 percent. For the third, the percentage declines to 13 percent and this trend continues. For the fourth, the lender is down to 12 percent; for the fifth and sixth, the lender is down to only 11 percent. For the sixth, however, the lender can also charge a database verification fee (the costs of verifying outstanding loans).
Under these laws, therefore, the 14 - day APR on a $100 loan works out to a cost of 390 percent.
Staying Educated on Michigan Payday Loans
It is important to know the fast cash Michigan laws so you can know what to expect if you want to take a payday loan. The laws help to keep you from getting in over your head and from owing way more than you can afford, but they also keep payday loans legal so this important financing option is available to those who really need it.