One of the most burning topics in the Fintech and loan providing industry these days is 'payday loan'. As controversial as it is, it is the most extensively used service by the consumers these days and there seems to be no stopping it.
Payday loans are short-term loans with relatively high interest rates available to consumers.
Payday loans are typically based on the income of the consumer/applicant, and they have to provide salary details when applying for one.
Payday loans charge borrowers high-interest levels. It does not require any collateral or security. These loans may be considered predatory lending, as they have extremely high interest, don't consider a borrower's ability to repay, and have hidden provisions that charge borrowers added fees. As a result, they can create a debt trap for consumers. Payday lenders charge very high levels of interest: as much as 780% in annual percentage rate (APR), with an average loan running at nearly 400%.
Because of very limited options in the market, consumers are left with a very little to no alternative and that is when Payday loans come into action. Payday loans providers do not ask for collaterals and/or security and the rate of interest is exponentially high. The one plus point of Payday loan is that it can be relied upon during the emergencies, when all doors seem to be closed. Some of the providers do not even ask for the credit score of the consumer.
The page for each state where payday lending is legal gives the key cost of loan terms under state law. Look for the cost of a payday loan in dollars and annual interest rate for a 14-day $100 loan. Each page lists the maximum number of loans a consumer can have, any limits on loan renewals and requirements for extended repayment plans. Collection limits spell out the fees lenders can charge if the loan is not repaid and whether the lender can use or threaten criminal action if a borrower is unable to make good on the check used to get a loan.
In states that still have small loan rate caps or usury laws; the state page gives the citation for the law that limits rates, and the small loan rate cap.
Payday Loan is a rising controversy in the industry and its growth is exponential. As long as there is no uniform regulatory system to keep a check on it, the interest-rate controversy will not be put an end to.