Vermont Payday Lending Rules and Laws
A payday loan also referred to as a fast cash loan that is issued to help a person obtain cash to meet expenses until payday. These types of loans are usually required to be repaid within a week or two from the time that the loans are issued.
Payday loans work differently from many other types of loans. Unlike when you obtain a credit card or a bank loan, your credit is not important when it comes to qualifying for a payday loan. Those with no credit or with bad credit scores are generally able to obtain a payday loan provided that they actually have income from a job and provided that they have a bank account. Payday lenders also lend money much more quickly than other lenders. It is possible to apply for a payday loan and to obtain the funds right away from the loan.
The biggest benefits associated with payday loans are the easy qualifying standards as well as the convenience and simplicity of obtaining the loans. If you have a pressing cash need such as car repairs or bills that are due before your paycheck comes in, you can go to a payday lender and get the money you need even if you have bad credit.
However, the benefits of payday loans do not come without cost. Payday lenders typically charge very high fees in order to issue the short - term loans. The fees are effectively the interest rate, or the money paid in order to borrow. Because the fees can be such a large percentage of the amount of money that you borrow, there is a very high effective annual rate, called the APR. The APR may exceed 400 percent with some payday loans, as compared to most credit cards, which have an APR of 30 percent or lower.
Payday loans are also short - term which means you will need to pay them back within a limited period of time. Many people find they are unable to do this and they end up having to renew the loan when it comes due, paying yet another fee and increasing an already high interest rate.
The dangers of payday loans cannot be understated and many financial experts caution borrowers against taking these types of loans. However, there are situations where you have quick cash needs and a payday loan makes sense.
Vermont Payday Loan Laws
While there may be times when taking a Vermont fast cash loan would be a viable option for people in need of short - term cash, Vermont has imposed limits that make traditional payday loans more difficult to come by.
These limits are found in 9 V.S.A section 41a, which set legal interest rates. According to the relevant law, single payment loans that are regulated by Title 8 and federal savings and lending associations may not have an annual interest rate in excess of 18 percent.
Payday loans are generally considered small single payment loans that fall under this regulation. This means that lenders are limited to charging only 18 percent interest on loans issued in the state. Since payday lenders have a business model that is based on charging much more than this, this makes Vermont an unattractive state in which to issue payday loans.
Anyone who is considering taking a loan that has an interest rate in excess of 18 percent should be aware that the lender may not be in compliance with Vermont law. This should send up red flags and you should proceed with extreme caution when pursuing such a loan.
Stay Educated about Payday Loans
It is important to realize that lawmakers change and refine laws every day in order to better protect consumers and constituents. The fast cash Vermont laws could change over time as well as those considering taking a payday loan should be sure they are aware of all current legal regulations that apply to this type of lending.