Thinking of a Payday Loan?
Although a payday loan may be a convenient short-term solution, it is inappropriate for long-term cash needs. If you are thinking of getting a payday loan, please read the information below.
What is a Payday Loan?
A payday loan is a small, unsecured, high interest, short-term cash loan. In most cases, consumers write a post-dated, personal check for the advance amount, plus a fee. The lender holds the check for the loan period and then deposits it, or the customer returns with cash to reclaim the check.
If You Decide to Get a Payday Loan, Shop Wisely
- Contact the Department of Financial Institutions to verify that you are dealing with a licensed lender.
- Comparison shop for the lowest fees and penalties. For example, some credit unions offer payday loans with lower fees.
- Borrow only as much as you can afford to repay with your next paycheck.
- Know when your payment is due and be sure to repay the loan on time and in full.
- Avoid borrowing from more than one lender at a time.
- Plan for the future by making a realistic budget to help avoid the need to borrow for emergencies and unforeseen expenses.
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Think a Payday Loan is the Answer? Consider Your Options!
- Ask about delaying or making payment arrangements on your non-interest bills like telephone and utility bills.
- Ask to borrow money from a friend or family member.
- Ask your employer for an advance on your paycheck.
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What to Expect in Washington State
- Maximum Loan Term: 45 days
- Maximum Loan Amount: $700
- Maximum Fee: 15% on the first $500
For Example: A loan for $500 + $75 fee = $575
A loan for $700 + $95 fee = $795
Under the Truth in Lending Act, the cost of credit must be disclosed. Among other information, you must receive information outlining the finance charge and the annual percentage rate (APR). The APR informs you of the cost of your loan. For example, a 14-day, $500 payday loan with the maximum fee permitted by statute would have an APR of 391.07%.
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Know Your Rights and the Law
- You have the right to change your mind about the loan within one day.
- You have the right to know all of the costs involved.
- You have the right to a payment plan.
- A payday lender may not threaten criminal prosecution as a method of collecting a past due loan.
- A payday lender may not allow a borrower to use a new payday loan to pay off an existing payday loan by the same lender or an affiliate of the lender.
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