Understanding your legal rights regarding your payday loan is essential for ensuring that you are (a) dealing with the legitimate establishment and (b) protecting yourself.
Although payday loans are strictly regulated in most states and on a federal level, there are certain payday loan companies that participate in shady or illegal practices. It is, therefore, in your best interest to educate yourself on your rights as a payday borrower so that you can make the best decisions regarding your finances and the companies with whom you choose to do business.
The following list details items that you, as a borrower, should be aware of during the payday loan process:
- Your individual state should have laws in place regarding the maximum cash you can take out for a payday loan. Some states, such as Montana, for example, limit the amount of cash you can borrower to $300, while other states that number can be $1,000 or even $1,500. As a loan borrower, it is in your best interest to find out the maximum amount of cash you can borrow, according to your state, before you consider a payday loan.
- Payday loan companies vary widely in the costs associated with their payday loans. The payday loan company should always clearly explain these costs to you before you commit to the payday loan. The company should also have the fees clearly written on the contract. Some of the information which should be provided includes the finance fees and the APR of the loan.
- The payday loan company should provide you with a list of payment plans and timetables during the application process. This information should be provided as to give you a clear picture of the total cost of entering into a contract with a payday loan company.
- Understand the ramifications of non-payment. Payday loans are considered to be short-term loans; therefore, if you fail to repay the loan, the company can sue you in a civil court and seek to garnish your wages until the loan is repaid.
- You should be aware of your right to cancel the loan, although the laws may vary by each state. It is important to educate yourself on the laws in your state so that you can come armed with all of the information necessary to make a well-informed decision.
- Never, ever enter into a payday loan contract if you don’t fully understand the terms and conditions of the loan. Most payday loan companies, if they are legitimate, will provide all of their terms and requirements on their website, or they will have brochures or other material for your review.
- Ask the payday loan company if they are a member of the Better Business Bureau (BBB). Most payday loan companies who are linked to the BBB work to provide excellent customer service, and thus, it may be in your best interest to choose a company with this affiliation.
- Always make sure you contact the payday lender immediately if you are unable to pay the loan in the agreed-upon timeframe.
The more knowledge you know about your legal rights, the better your experience in managing a payday loan shall be.