Disecting North Carolina Payday Loans
Payday loans are loans that are issued on a short - term basis. Typically, a person who takes out a payday loan will have a period of around 14 days in which to repay the loan, although there may be some other options available. When a person takes on a payday loan, the purpose of this short - term loan is to allow for money to spend until payday comes. When the debtor gets his next paycheck, he is supposed to repay the payday loan.
Payday loans fill a need for short - term loans that is not filled through traditional bank loans or credit cards. In many cases, those who take payday loans do so because they are not able to obtain other more traditional sorts of loans as a result of their bad credit. For example, those who take payday loans may not have credit cards as a result of past bankruptcies or other credit problems. Payday loans, unlike most credit transactions, do not require the debtor to have a credit check and bad credit is not a disqualifying factor.
Fast cash loans are not only easy to obtain but they are also fast and convenient. It is possible for a person to apply for a payday loan and to get access to the money right away. There is no lengthy application process or waiting period. For someone who needs to get ahold of money right away in order to pay essential bills, such as car repair bills or a bill to keep the utilities on, payday loans can be a valuable source of credit.
Unfortunately, payday loans are not a good form of debt. The big problem with payday loans is that there is a huge cost to borrow money this way. Payday lenders charge fees for these short - term loans, which are typically small dollar value loans under a few hundred dollars. The fees are so high in relation to the amount borrowed and in relation to the duration of the loan that a borrower ends up essentially borrowing money at an annual percentage rate (APR) that exceeds 450 percent.
The annual percentage rate is the interest rate or the cost of borrowing. Most credit cards, even for those with bad credit, tend to have an interest rate of around 30 percent or lower. To have an APR exceeding 450 percent, therefore, it is clear that you are spending a lot of money for the privilege of taking out the loan.
Payday Loan Laws in North Carolina
Payday loans, because of the fact that they cater to those with bad credit and because they have very high interest rates, are often frowned upon by regulators and financial experts. In fact, in North Carolina, lawmakers have passed laws intended to protect people from the dangers of payday loans. The law, N.C. Gen State 53 - 173 that addresses payday loans effectively bans this type of lending from taking place.
North Carolina prohibits payday lending and puts a cap on small loan charges of 36 percent per year. A loan that charges you more than 36 percent per year can be in violation of the law in North Carolina.
North Carolina fast cash lenders don't make loans with interest rates that low, so it can be difficult to find anyone who is offering payday loans in North Carolina. Those who do offer traditional payday loans with high interest rate may be in violation of the laws of North Carolina. You want to be very cautious and walk away if you are dealing with a lender who is trying to offer a payday loan with a higher interest rate than is allowed by law because the lender may be operating illegally.
Stay Educated About Payday Loans
The fast cash North Carolina loan ban has existed since 2001. Lawmakers, however, are trying to charge the rules so that payday loans will be allowed again. Senate Bill 89 would authorize payday loan transactions up to $500 and would permit lenders to charge a 15 percent fee for each $100 that a debtor borrowers. This could result in a debtor paying an APR in excess of 300 percent on a two - week payday loan.
Keeping abreast of the changes to the law is important, especially as lawmakers consider this new legislation. By understanding payday loan laws in North Carolina, you can make a more informed choice about how to proceed with your lending decisions.