A Massachusetts payday loan
Massachusetts is hard to spell, but rife with history, beauty and excellent fresh seafood. The New England Holocaust Memorial is one of the lesser known historical sites but no less stunning. Even those who are less than familiar with American history should have seen enough of it in movies to be aware of the significance of this state.
Judicious use of a Massachusetts payday loan can also help you to avoid historically bad credit and high debt.
High Risk/High Benefit
While it is wise to be cautious in your use of payday loans, as there is strong potential for increasing your debt rather than improving your financial state, there are ways this system can serve as a benefit and help with credit repair. If you have found yourself in a situation where a very low credit score impedes your ability to borrow, sensible use of short-term credit can help to improve the data that appears on your report.
Payday lenders incur a high degree of risk when they disburse monies to a borrower. This is because a traditional bank will run a comprehensive credit check of potential borrowers in order to determine an appropriate loan amount, interest rate and repayment terms, while minimizing their risk of a default on the part of the borrower.
A payday lender only requires proof of employment and a checking or savings account on the part of the borrower. This puts them at a higher risk for default from the borrower, thus they charge a concomitantly higher interest rate to mitigate this.
By the same token, this leads to a much higher level of risk on the borrower’s part. If she fails to repay the loan in a timely fashion, the penalties are much more extreme and significant. However, wise use of such loans can salvage an emergency situation without leading to further emergencies.
How To Use Short-Term Credit
Payday loans are an excellent source of funding in an emergency, especially if a borrower’s access to any other type of credit is limited and time is short. Unlike a traditional loan, short-term credit can be deposited into a checking account in as little as 24 hours, which, in a crisis can make all the difference. Because of the high costs on these loans, they should never be applied to recurring debts, as they will lead to a whirlpool of interest and borrowing that may never be escaped.
However, prompt and full repayment of loans can begin to lead to the cleaning up of your credit report and an improved credit score. This is in turn may help lower your debt on several fronts and enable you to improve your financial standing.
Payday loans in Maine is not considered safe financing
The state of Maine does not have any available providers of payday loans because the practice is outlawed in the state. Maine’s state laws prohibit anyone, including a check cashing service, from cashing or advancing any money on a postdated check and calling this service any type of loan. All loans in the state must be made by a licensed lender and must comply with the laws that govern small loans.
The state of Maine has laws in place that cap interest rates on loans whether they are small loans or large loans. On small loans the state has a mandated interest rate cap of 30% calculated annually.
A supervised small loan lender can provide a service that is similar to payday loans, but is barred from originating a typical cash advance loan on a post dated check. The small loans that are similar to payday loans have fees that are strictly mandated by the state.
The fees for a loan up to $75.00 cannot exceed $5.00. Loans that are for $75.01 to $249.00 will have fees that are not allowed to be over $15.00 and all loans from $250.00 to $2000.00 are required to have fees that do not exceed $25.00.
Some people in the state have gone around these laws by getting payday loans from an online service, but even then they are operating in a legal grey area. The only reason online providers of payday loans are still able to operate happens to be because their legality has not been challenged in court.
If you live in Maine and you need short-term financing, getting payday loans online might be just what you need. Consumers in the state should be warned that as many states in the nation try to crack down on payday loans, Maine might start to take a closer look at online providers. People in the state that use these services might be putting themselves in legal jeopardy.
There are better ways to get short-term financing in Maine. One easy way to find out what you might qualify for is to simply talk to your bank. Some financial institutions in the state have all kinds of loans that can help consumers in a pinch.
The chances that the state will ever allow lenders to provide payday loans are so slim that if you held your breath you would be sure to turn blue and pass on. This is good news for low income families especially, who tend to be the primary targets of predatory lending practices. Safe financing options in Maine do not include payday loans.
The dangers of the payday loans industry
Payday loans are a popular and fast growing means of borrowing money. Their popularity is due to the ease with which the process works as well as its very short processing time. A customer writes a personal check for the desired cash, plus a fee for the payday loans lender. The borrower and payday loans lender both know the borrower has insufficient funds to cover the check.
The payday loans lender then advances the cash and keeps the fee, usually about $20 per $100 borrowed. The lender holds the check for two weeks or until the borrower’s next payday. And on that date, the customer can either redeem the check with cash or allow it to be deposited. If the borrower can’t cover the check, the lender collects another fee and holds the check for another two weeks. This is called a rollover.
Under the federal Truth in Lending Act, the cost of payday loans must be disclosed as both a finance charge and an APR. APR stands for “annual percentage rate,” the standard cost of credit to the borrower on an annual basis. If payday lenders complied with this standard, the APR on a payday loan would range anywhere from 390% to 1,000%!
Thus, it is no wonder the payday loan industry is growing so fast. According to an investment firm that does research for investors, payday loans firms enjoy a 48% return on investment, if we assume a 40% tax rate. Thus, more than $10 billion is made in a year, nationally, by payday loans.
Unfortunately this explosive growth is at the expense of low-income and elderly people. The convenience and simplicity of payday loans tend to conceal that a payday loan is at least 10 times more expensive than a traditional small loan. Even a cash advance made with a credit card costs only a fraction of the price of a payday loan.
For a household in financial strain, mounting payday loans fees can cause a shortage of money for basic necessities. But the families keep paying, and so the industry keeps growing. They are worse than pawnshop loans, where the borrower can always walk away without redeeming the pawned item. Since payday loans are secured by the borrower’s own check, the borrower must pay both the principal and the fees, or face possible prosecution on bad check charges.
A bill that would allow payday loans lenders to attach high charges to small loans charges that would amount to more than 10 times the interest allowed by law, is now under consideration before the Legislature. The bill would further worsen the situation. It would provide a loophole for payday lenders, changing the legal definition of their business from lending to deferred presentment of personal checks. And as a result, payday loans lenders would be exempt from rules governing traditional lenders.
Payday loans lenders argue that they provide customers with onetime financial aid for emergency expenses. They argue that since, no one else would takeout mortgage loans at such rates it is okay for the payday loans to be expensive. But according to industry sources, a typical customer takes out 11 or 12 payday loans a year, and nearly 40% of borrowers extend their loans past the initial two-week term. One payday loan firm even reported that it relies on repeat customers for more than 89% of its business.
There are some people, who believe that the solution to the exploitation of customers by payday loans companies lie in competition. They are for payday loans lenders competing without restriction in the open market. But in reality, the free market doesn’t benefit consumers with few real choices and limited knowledge on or experience with borrowing. And this lack of awareness is the reason why payday loans customers, lured in by a smooth sales pitch, often find themselves in a widening spiral of debt.
Thus, there is need for caution when traveling through this confounding industry. So be cautious about the payday loan lenders as they can easily misguide you. Also, if you’re currently considering payday loans in the near future, it would be helpful to read up on payday loans lending.…