PayDay Loans – No more installments

andriana125 · #1 (**permalink**) 02-08-2010, 08:55 AM

Payday loan is a special type of loan provided by the banks preferable in the US. These types of loans are for short term only and are required to e paid before applying for the next loan. Advantage of payday loans is that they are issued immediately as a customer applies for it within a period of a day.

franfran · #2 (**permalink**) 02-09-2010, 05:06 AM

Here's a bit of information about these loans from the Office of Fair Trading's website:

Quote:

Payday loans are loans provided for less than 62 days, which are often marketed as cash to tide you over until your next pay day. Until recently they were unregulated but are now covered by the Consumer Credit Code. This means that all the protections of the Code and the documentation required by the Code applies to this type of loan in the same way that it applies to personal loans, credit cards and other types of credit.

It is important to take note of the cost if you are considering a payday loan. Typically, the cost associated with this type of credit is very high and you should consider whether you could get cheaper credit elsewhere, or whether in fact you should consider alternatives to borrowing, such as contacting creditors to try to reschedule current debts. You may need to talk to a financial counsellor about this.

If you decide to take out a payday loan, you should be aware that payday lenders are not allowed to charge any more than 48% interest, and that no fees can be charged on top of this.

Prior to 1 December 2001 lenders did not charge interest, but set fees according to the amount of the loan. This is de facto interest, but since it was not expressed as an annualised interest rate, the consumer may have been unaware of the true cost of the loan compared to other possible sources of credit. If annualised, the cost of credit for pay day loans would average up to 1000%.

The Consumer Credit (New South Wales) Amendment (Pay Day Lenders) Act 2001 amends the Consumer Credit (New South Wales) Act 1995 to apply the provisions of the Consumer Credit Code to those providers of short term, high interest credit. Banks and other authorised deposit taking institutions are expressly excluded from the effect of the amendment.

The new laws require pay day lenders to disclose the cost of credit as an annual percentage rate. All fees charged which are in the nature of interest will be included in the annual percentage rate. The maximum interest rate of 48%, which currently applies in New South Wales, will be calculated to include fees and charges as well as interest. This applies only to pay day lenders. The Consumer Credit (New South Wales) Special Provisions Amendment (Pay Day Lenders) Regulation 2001 outlines how the rate must be calculated.

Link to website