Payday Loans: Your Rights and Responsibilities As a Borrower
Most loan seekers (borrowers) do not do their homework before requesting a payday or installment loan. Why? Because they need the cash right away, and this is understandable. However, it is crucial that you understand what your rights and responsibilities are.
A rollover is a service that is extended by lenders in states that allow them. A rollover allows you to extend your loan past its due date. Rollovers increase the costs of your loan because it involves another fee on top of the original one. That is why rollovers are not allowed in 20+ states, and most other states have a limit on the number of times a payday loan can be rolled over.
Before entering into any loan agreement, you should check your local state laws and regulations. Pay close attention to the points related to interest rates, repayment terms, and the possibility of rollovers.
Loan Seeker Rights
You have rights that apply anytime you enter into any loan agreement. These include the right to choose the best loan for you, the right to a detailed accounting of all loan fees or charges, the right to back out after a 'cooling-off period.' You also have the right to communicate with your lender regarding any changes to your loan.
You should educate yourself and know your rights because it will ensure you get the type of loan that best suits your current needs. Always read the loan contract carefully before you sign it.
Fees and other Charges
Every borrower has a responsibility to pay back their loan from the lender. But you also have some rights under the Consumer Credit Protection Act. You have the right to choose a loan without any pressure from a lender, and the right to a "cooling off" period during which you can cancel the loan within 3 working days.
Understand Your Loan Terms and Conditions
You have the right to receive an estimation of all loan interest rates, fees, and charges before you sign any loan agreement. Every lender must legally disclose every detail of your loan agreement and any costs that will or may occur. So, you must read and understand your agreement and ask questions about anything you do not understand.
When you borrow money, you are entitled to make an informed choice. You have the right to know the total amount of your loan and any fees you will pay over the life of the loan. You also have the right to know what charges could occur if you take any action or no action at all.
Until you sign your loan, your lender cannot charge any fees. All charges should be part of your loan. If a lender requests fees upfront, before you receive your money, you are dealing with a predatory lender. These lenders falsely use names of legitimate companies they find on the internet and try to convince you to ‘make a deposit’ or some other ruse. They are all illegal but almost always offshore and impossible for our government to police. Never, never pay money upfront for any kind of loan!
- Every payday loan applicant is required to provide this minimum information:
- A valid government-issued identification card or state license number
- A current checking account number which is active, and does not have a negative balance
- A valid residence address and phone number (can be your cell phone), and email address
- You must live in the state where you are applying for the loan
- Three months of verifiable employment, more is better
A lender is required to disclose everything about your loan, including the amount borrowed, the terms and conditions, and any penalty that could be charged. They should also reveal how much you will be charged if you are delinquent or default on the loan.
In some states, there are rules which require a lender to verify a borrower’s ability to repay the loan before making an offer, limit the number of times they can debit your bank account, and prohibit consecutive loans or rollovers to you.
Every state has different laws that you can view on your state’s website.
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