Payday loans became increasingly popular after the turn of the millennium, reaching the height of their popularity and their highest numbers in 2006. This comes as no surprise, since their offer of short-term loans of small amounts, which you pay back on your next pay day is one that’s enticing to many, as it’s fairly common to find yourself short of money halfway through the month, needing to pay out for something important. Although the amounts vary by state, legally, payday loans can be for any amount between $100 and $1000, and the interest rates and charges on loans are capped in the majority of states permitting the loans. Payday loans can be borrowed from pawn shops, check cashing stores, payday loan stores (often operating online), and toll-free phone numbers. Sometimes, rent-to-own companies may also offer the loans, but it really does depend on the store.
Unfortunately, these loans often prove to be far more expensive than at first glance, and cause people to find themselves in more debt than before, as the loans are much more expensive than other cash loans and loans granted by banks, due to their high interest rates and fees. It’s fairly common to find that payday loan lenders are using some kind of scheme to hide the fact that they’re offering payday loans, and so are able to avoid the regulations, penalties and limits on the loans set by the governing bodies of states. The payday loan lenders know that a borrower will often find themselves having to take out a second loan to repay the first, and so the borrowers get caught having to take out multiple loans with one company, greatly benefiting the lender but destroying the finances of the borrower in the process. Because the risks that come with payday loans are so high, you should make sure you know the facts and the regulations on payday loans in your state and the general situation of payday loan lending throughout the US.
Payday loans are prohibited currently under Massachusetts law. The Small Loan Act specifically prohibits check cashing stores and other similar stores from creating loans unless they’re licensed under the Small Loan Act. Small loans are still available in Massachusetts, although the act sets a cap on the interest rates of these loans at 23%, plus one administrative fee of $20 upon the granting of the loan to the borrower.
The regulatory body for small loans in the state of Massachusetts is the Massachusetts Division of Banks, and the main contact regarding loans is Supervisor, Kevin McNamara. If you need to get in touch or want to find out more information, call the department on (617) 956-1500 or write to them at One South Station, Boston, MA 02110.
If you are going to take out a payday loan, remember to always check that the lender abides by the regulations and that they’re not advertising the loan as something else. And if you’re getting your loan from an online lender, be wary of the additional security and fraud risks that come with online transactions.