Montana Payday Loans Understood
One of the most popular yet controversial types of financial product on the market is called a fast cash loan or a payday loan. Many experts decry payday loans as a bad thing and as a form of predatory lending that preys on people who are desperate to get money, but payday loans also exist for a reason and those who need these types of loans are usually very grateful that they exist.
Payday loans are disliked by financial experts because of the high costs associated with borrowing from them. The costs of borrowing for most types of loans can be expressed in terms of annual percentage rate, or APR. An APR is a standardized way of determining exactly how much it costs you to borrow money, so this measure is used even for loans like payday loans that have to be paid back in a much shorter period of time than one year.
A payday loan will charge a high fee for a short - term loan for a low dollar amount. Since the fee is a large percentage of the amount being borrowed, payday loans have a very high effective APR. The APR may be as high as 450 percent. To see just how very high this is, consider that even the average high interest credit card is going to have an APR that falls below 30 percent. Borrowing money on a payday loan is clearly a lot more costly, which is why many financial experts don't like them.
Financial experts indicate that payday loans prey on desperate people because they have no credit score requirements. Those who have bad credit or who do not have a credit history typically cannot get other financial products like credit cards. As such, people in this situation have to turn to payday loans because there are no other options.
However, critics of payday loans forget that these loans serve an important purpose. They are virtually the only kind of loan that you can qualify for really quickly and easily regardless of your credit and that you can get if you have just a short - term expense that needs to be paid. In many cases, paying for the costs of the payday loans makes sense if your immediate financial need is really pressing. These loans can be invaluable in these situations and it is up to you to decide if your particular situation is one where it makes sense to take on a quick loan.
Payday Loan Laws in Montana
In Montana lenders have passed laws about payday loans including laws found in Mont. Code Ann. 31 - 1 - 701. These laws are intended to ensure that consumers who need pay day loans have access to them but that the lending practices are not too onerous or abusive.
Under the Montana fast cash laws, you are allowed to borrow only up to $300 from a payday loan. The loan tenure is set at 31 days and the maximum fees and finance charges that can be instituted by lenders is 36 percent APR. While the law allows payday loans, therefore, a strict cap is placed on interest.
Because of the limitation, however, many payday lenders closed their doors and no longer operate in the state. The interest rates are simply too low to fit the business model that payday loan stores have of charging very high interest rates.
Staying Educated on Payday Loan Laws in Montana
Fast cash Montana laws are always controversial because the laws interfere with the right of the lender to do business and with the right of the borrower to make free choices about what financial products are right for him.
Still, the laws exist to try to protect consumers, even if the laws are imperfect and can end up leaving those who need a payday loan struggling to find one.