Rhode Island Payday Laws & Resource Guide
Many people will find themselves facing financial challenges at some point in their lives and will experience difficulty getting through the month before their paycheck runs out. If you find yourself with a financial expense that you cannot meet and your payday lingering in the future, an option available to you is a payday loan which is also known as a fast cash loan.
Payday loans are a lending product specifically intended to help people who need quick cash to get them through and meet their expenses until their next paycheck comes in. Payday loans aim to be easy and convenient to obtain and they largely succeed in this, as it is possible to quickly get a loan with minimal application requirements.
Unlike most types of financial lending products, payday loans are not limited to people with good or decent credit. In fact, your credit score doesn't matter at all when it comes to applying for a payday loan. The only two major factors that determine whether you are eligible to take this type of loan out or not are whether you have a job with regular income and whether you have a bank account. If you do, you can typically get a payday loan.
The fact that payday loans are so easy to obtain, combined with the speed and ease of obtaining them, makes them a viable solution for people in tough financial straits. Yet, although they serve a useful financial purpose, financial advisors strongly advise against using payday loans and many lawmakers have imposed limits on when and whether such loans can be issued.
The reason for the dislike of payday loans largely stems from the very high effective interest rate associated with these kinds of loans. An effective interest rate is the cost of the loan, which is expressed in terms of an annual percentage rate (APR). Even though you don't take a payday loan for a one - year period, the APR is still used as an objective measure to tell you how expensive the loan is. You can, for example, compare the APR of a payday loan to the normal APR of a credit card, which is usually 30 percent, or less in most circumstances.
When comparing the cost of a payday loan, you will see that the fees and expenses typically result in the loan having a very high APR considering how short - term the loan is. For example, borrowing money for a 14 - day period can result in you paying an APR of over 450 percent per year.
In the state of Rhode Island, there are laws in place that apply to lenders. The laws are found in 19 - 14.4 - 1. Laws exist to limit what fast cash Rhode Island lenders can do and how the loans can be structured so the public is protected from predatory lending.
The limits include a cap on the maximum amount borrowed. Debtors can only take on a payday loan for up to $500. There is a maximum of three outstanding payday loans permitted at one time, so borrowers cannot exceed their borrowing abilities and borrow thousands and thousands of dollars from payday lenders.
Rhode Island also indicates a 13 - day loan tenure is mandated and that the fees and finance charges are limited to 10 percent. This, however, does not mean a 10 percent APR but instead means a 10 percent limit on the money borrowed over the short term. This can work out to an effective APR of 260 percent on a 14 - day payday loan for $100. This is high, but the APR on payday loans in many other states is much higher.
Stay Educated on Payday Loans
When you take on a Rhode Island fast cash loan, you need to know what the laws are. These payday loan laws provide you with some protections and understanding these protections is important so you can make an informed choice as a consumer. You should be sure to review these laws as well as any changes, additions or alterations to the law before you take on a payday loan.