There are those days when the money that people have in their pockets is not enough to sustain their financial needs and expenses. For people who have to make emergency payments but their next pay check is still far away, a payday loan seems to be the best option that anyone can have.
Payday loans work by lending a specific amount of money to a borrower. This should be paid in a short duration of time. Then, the lender asks the borrower to write on the check the amount to be borrowed. After that, the lender will give a check or deposit the money into the borrower’s bank account. This is a convenient and fast way of getting money but this will involve high interest rates.
In Rhode Island, according to R.I. Stat. Ann. 19-14.4-1 et seq., payday loans are only legal to obtain from check cashers. This means that the state only allows the operation of payday loan companies that can release a check for the amount borrowed. The check being released is for a fee. The maximum amount of loan that can be made is $500. The minimum term for a loan is 13 days. However, there is no maximum term stated by their laws. When the 13 days is up, the payday loan company will cash out the check that was signed by the borrower. That’s where they will get back the money they lent as well as their finance charges or service fee.
Based on the laws of payday loans in Rhode Island, the maximum finance rate is 10%. So, in the loan payment, the borrower will pay the whole amount plus 15% of the value indicated on the check. For example, if the amount borrowed is $300, the borrower would have to pay $345. Then, for a 14-day $100 loan, the lender should only charge $10. Consequently, only 260% is the allowable Annual Percentage Rate (APR) that the lender could charge to the borrower.
The government of Rhode Island only permits 3 payday loans per person every year. In each loan, $500 is the maximum amount that can be borrowed. If the borrower cannot afford to let the lender cash the check, only one rollover is allowed. Usually, this extends the payment period for 14 days. The laws of payday loans in this state do not specify the collection limits.
The payday loan companies located in this state are all required to post their fee schedules and interest rates at their office. Aside from that, a written contract is a must. This must be signed by both parties – the lender and the borrower. This is to ensure that the borrowers are knowledgeable about the terms that they have with the lender. Also, a list of identification forms that these lenders accept for issuance of loans must be posted.
A payday loan is a very convenient method of obtaining money especially in rough times. The application process of the loan is very fast. It will take less than an hour for its approval. However, borrowers must be well-informed about the terms and conditions of the loan.