The Gist on Minnesota Payday Loans
There are lots of different kinds of loans and sources of credit or financing, but each serve different purposes. A mortgage, for example, is a secured loan used to buy a house. A personal loan obtained from the bank can allow you to remodel, pay living expenses or invest in a business. You'll typically pay it back over a period of time that can last for a few years. A credit card is an unsecured type of revolving credit, which means you charge as much as you need and make payments on a monthly basis.
Unfortunately, these financing options may be cut off to someone who has bad credit or who does not have a credit history. Lenders look at your credit score in order to make a decision on whether to lend you money or not. If your credit score is bad because of bankruptcy or a history of late payments, the lenders may decide not to lend to you.
If you are in this situation and you need to borrow money, a fast cash loan may be the answer. A fast cash or payday loan is different than the other types of loans because it doesn't provide you with long - term financing, it is easier to qualify for and it doesn't take your credit into account. A payday loan gives you cash very quickly on the basis of having a bank account and a job. You then have to pay that cash back within a limited amount of time.
Payday loans work when bank loans and credit cards don't because they can get you your money much faster than the other types of lending options. Unfortunately, this does not come without a cost. The cost, in this case, is the high fees associated with a payday loan. Fees for a payday loan, when expressed in terms of an annual percentage rate, can mean that borrowing money is really expensive.
For example, an average annual percentage rate (APR) is going to be around 450 percent for a payday loan. This is many times greater than a mortgage under 6 percent APR or a credit card that almost always has an APR of 30 percent or less. This means you pay a lot to borrow, even though you keep the loan for a limited time and the loan is for a small amount of cash.
Before you take the payday loan, make sure that it is worthwhile to you to pay for the loan and bear the costs of the fees.
Minnesota Payday Loan Laws
Because payday loans can get people into financial trouble, many states in the U.S. have taken various types of legal actions in order to provide protection to consumers. Minnesota is one of the states that have laws in place. These laws do not ban payday loans, as certain legislation in other states do, but the laws do impose some restrictions on what lenders are allowed to do.
Under the laws, for example, a person is allowed to borrow only up to $350, no more. However, there are no rules specified for how many different or separate loans a person can take out at one time. A loan also must have a maximum loan term of 30 days and no longer, and no rollovers are permitted.
Minnesota fast cash lenders are restricted when it comes to what they can charge to borrowers as well. The restrictions vary depending upon how much is borrowed. If a borrower takes a loan for less than $50, then the maximum fee is $5.50. If the loan is between $51 and $100, then the maximum fee is 10 percent of the money borrowed plus $5. If the borrower takes a loan for between $101 and $250, then the maximum fee charged is 7 percent plus another $5 fee. Finally, for loans between $251 and $350, the maximum charge is 6 percent plus a $5 fee.
Under these laws, debtors taking a fast cash Minnesota loan for a two - week period can expect to pay an APR of 390 percent if they borrowed $100.
Staying Educated About Payday Loan Laws
The laws are designed to protect you if you borrow from a payday lender, and they do offer some protections so you aren't hit with even higher costs and interest rates. However, the protections are limited and you still need to be sure you understand what you are agreeing to when you take on a payday loan.