Are Online Payday Loans Legal? Everything You Need to Know
Payday loans are one of the best ways to get money quickly if you’re strapped for cash.
In the past several years, payday loans have become a popular option for those that are looking to borrow money. People typically get approved and funded quickly, and most lenders offer several different types of payday loans.
However, many people have questioned the legality of them because some lenders will include extremely high-interest rates. This isn’t the case for every lender, but it’s made people think twice before getting one.
So are online payday loans legal? Keep on reading to learn more about them.
What Are Payday Loans?
Payday loans are some of the most common loans acquired by those with low credit scores. These loans often come with short repayment periods and high-interest rates. They get their name because they’re meant to hold you over until you get paid.
It’s normal to see repayment periods of anywhere between 2 weeks to a month. Not only do you not have much time to pay them back, but you’ll face hefty fees if you don’t pay them off in time.
In most cases, you’d get a payday loan when you’re short on cash for a small purchase. You won’t see many lenders offer more than $1,000, so you’d have to combine them with another loan if you’re looking to make a larger purchase.
Are Online Payday Loans Legal?
Payday loans are legal in most states, but many have prohibited them because they feel as though they’re unsafe. While some lenders will include high-interest rates, state regulations limit how much lenders are allowed to charge.
If you check the legal status of payday loans, you’ll see which states let you borrow them and what your limit is. For example, states like Florida and California allow payday loans, but West Virginia and North Carolina prohibit them.
How Payday Loans Compare to Other Loans
While payday loans are effective if you need money as quickly as possible, it’s best to know about other loan types to help you make a decision. In some cases, you may be better off getting another loan, especially if you want to make a large purchase.
Here are some of the most common loans people get:
Personal Loan
Personal loans are similar to payday loans in that you borrow money that can be used for anything. However, you’re able to borrow much more with a personal loan and the repayment periods are longer.
You can apply for a personal loan at most banks and credit unions, though you’ll need to have a decent credit score to get a good loan. The best thing about personal loans is that you can negotiate with the lender to come up with a term that will work for you.
Mortgage
Most people are familiar with mortgages because they’re used to purchase homes. These loans can provide you with hundreds of thousands of dollars or millions. Unlike other loans, mortgages can last for several decades.
When you get a mortgage, you’re technically paying your bank for the right to fully own your house. If you neglect to make payments, they have the right to sell your house at any time for compensation.
Line of Credit
Just like mortgages, many people are familiar with a line of credit because they use credit cards. A line of credit is essentially revolving debt, letting you borrow as often as you like providing you make payments.
A line of credit is the maximum amount you can borrow. If you had a line of credit of $5,000, you can borrow up to $5,000. Once you’ve maxed that out, you’ll have to pay some of it off before you can borrow again.
Keep in mind that no matter what, you can only borrow up to the line of credit. If you were to pay off $500, you could spend no more than $500.
Getting a Payday Loan
Payday lending is a simple process because you can apply for them in person or get instant payday loans online. All you’ll need to do is browse for a lender that you like and see what their options are.
It’s best to look for a lender that offers the lowest interest rates. Most lenders that offer higher loan amounts will have higher interest rates because they’re looking to compensate.
If you choose to meet a lender in person, ensure that you bring your financial records so that you can increase the likelihood that you get approved. Most payday loan lenders don’t require much from their borrowers, but having things like bank statements will ensure you can pay the loan back.
You may have to opt for lower loan amounts if you have a low credit score, but you can quickly increase it by paying off debt. Start paying off the debt with the highest interest rate while making minimum payments on the other accounts.
Consider Getting a Payday Loan Today
After reading this article, you now know the answer to the question, “Are online payday loans legal?” If you think a payday loan would help you out with a purchase, consider getting one at one of your local lenders. Online lenders can often provide you money faster, but it may be harder to get one if your credit is bad.
Before you apply for a payday loan, think about what you’re getting it for. You’ll need to ensure you can pay it back so don’t get one unless you have money coming in to make payments.
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