Maryland Payday Loans are Technically Illegal
However, payday companies are still operating in the state but they are left on their own. This means they don’t have any legal power to collect their loans. Consolidation loans are considered legal and thus some lenders have opted to offer this kind of financing.
The maximum interest allowed on a small loan is 2.75% per month or an annual rate of 33%. This is applicable to loans under $2,000. Loans greater than this amount but under $6,000 have a maximum allowed rate of up to 24%. Although these might be too high for the borrower, they are profitable for the lender.
How to Be Cautious when Taking a Loan in Maryland
Although the state makes Maryland payday loans illegal, companies always find some way to operate. Be sure to do business with a legal lender.
There are 4 types of lenders in Maryland:
- In-state licensed lenders
- Out-of-state licensed lenders
- Tribal lenders
- Foreign-based lenders
In-state lenders are expected to adhere to the federal regulations according to the state’s regulator. The second and third type of lenders, as shown above, will practice their state’s laws into your state. Foreign based lenders operate by exporting their countries’ laws into your state.
Maryland Installment Loans and Personal Loans
These types of online loans are legal in the state and can be used for a costly one-time expense. Maryland installment loans are can be paid over a couple of months or years. Borrowers with bad credit can find friendlier terms.