Before signing contract agreements with payday installment lenders, prepare yourself with the fact that not all of the terms and conditions of the loan are clearly stated. There are hidden terms that are only revealed after the borrower has signed the loan contract. These hidden terms may surprise the borrower with additional penalty fees that he wasn’t aware of. These hidden terms are only revealed once a borrower has agreed to the loan contract and there is nothing to do but to abide with them.
In response to these treacherous practices of some payday installment loan lenders, laws have been written in every state in the United States to stop this abusive lending practice. It is now mandatory for all lenders to include a disclosure box where all of the terms and conditions regarding the payday installment loan must be explained clearly and understood by borrowers.
Nevertheless, it is also the task of borrowers to do their homework, read and understand all the terms related to the payday installment loan and contract agreements before signing. If you find the payday lender has violated laws, immediately take legal action and spare innocent borrowers in the future. Also, it is necessary that borrowers are informed about these laws to be able to see the lender’s mistakes and violations in order to protect themselves against these untrustworthy lenders.
The law has specifications about what fees are legal and what loan terms are not legal. Here are some fees associated with payday installment loans that are recognized by US state laws:
Interest Rates
Payday installment loan lenders are allowed to charge interest rates but there are limits as to how much they can charge. Low rate caps have been imposed in 16 states where lenders cannot charge interest rate that are more than 30% annually. In other states that allow payday lending, there are no low rate caps involved but there is a maximum legal limit on the amount of interest that can be charged by a lender. The maximum limit may vary from each state. However, watch for some of lenders who will try to charge you more than the legal limit. They can hide the fees in terms other than interest rates so as not to be obvious by state regulators.
One-Time Membership Fee
For states that regulate payday lender, lenders will try to charge a one-time fee to those borrowers who are applying for a payday installment loan for the first time. This membership fee of about $10 to $15 is illegal but careless borrowers will pay for this if they do not read their loan contracts meticulously. Nevertheless, even if this fee may be small, you can file a complaint against your lender.
Service Fees
Most lenders charge service fees to the borrower when a payday installment loan is issued. These fees are permitted by laws in most states. The fees include loan processing, verification, handling, origination, and other similar charges. However, state laws have certain maximum legal limits as to how much a lender can charge for these. If the amount of service fees charged by your payday installment loan lender goes beyond the legal limit, you should take legal action or try to negotiate a more affordable deal.
Rollover, Renewal, or Extension Fees
In case you are not able to repay your loan in full by the due date, you can get an extension. However, there will be additional fees so before signing your loan contract agreement, first read the provisions regarding payment extensions and check with your state laws on the maximum number of rollovers, renewals, or extensions. If your payday installment loans have been rolled over or renewed a number of times that exceeds the maximum legal limit, you can file a complaint against your lender.
Before signing any payday installment loan contract agreements, take precautions by reading the terms carefully and be aware of the state laws governing payday lending.