Payday Loans Could Be Changing Soon
If you have ever had to use a payday loan to get you from one week to the next, you know how stressful it can be to worry about fees and interest. Although payday loans were designed to be helpful, many people have a hard time paying them back and often suffer from credit problems as a result.
A recent study shows that the number one reason that many people use payday loans, at 69 percent, was simply to pay regular bills. Another 16 percent used them to pay for emergencies. With interest rates and late fees at extremely high rates, most of these people will find it very difficult to pay back the loans on time or at all.
When borrowers are unable to pay their payday loans back in time, they often borrow from other payday loan lenders and get the ball rolling on a debt they will never be able to control. People who have defaulted on payday loans in the past are not likely to use them again and for this reason, many payday loan companies lose business.
In some states, payday loans have been banned and are even considered predatory loans. States that do allow payday loans are now putting caps on the interest rates and amount of interest that can be charged for each loan.
A new bill that is currently making its way through the Legislature in Utah, will allow borrowers 60 days after reaching the 10-week limit to pay off the debt without lenders taking any further action against them. Giving the borrowers a chance to pay back the loan without added fees may motivate more people to use payday loans and help them pay off their loans and get out of financial trouble.
The bill also states that if the lender must sue a borrower for nonpayment, they must do so in the borrowers city, instead of making the borrower coming to the lender’s area. The bill also, modifies the reporting requirements for deferred deposit lenders, imposes additional requirements before the extension of a deferred deposit loan, prohibits a deferred deposit contract from modifying statutory venue provisions, requires notice before initiating a civil action, modifies provisions related to extended payment plans, and makes technical and conforming amendments.
Very few people have opposed this bill and most believe it will help make payday loans more popular. While this bill only applies to the state of Utah, other states will likely follow suit.
What do you think about this new bill?
Image via Wikimedia Commons