What You Should Know about Online Loans in Pennsylvania
Generally, payday loans are prohibited in Pennsylvania State. Having said that, this lending business is still thriving online.
Read the following guide to know the ins and outs of payday lending in this state.
History of Pennsylvania Payday Loans
Lenders who are still providing cash advances to consumers are doing it within the restrictions of the law. In 1998, a law was passed in the state that prohibited check-cashing firms from issuing loans based on postdated checks.
This rule basically applies to payday lenders even though they are not check-cashing companies. Payday loans basically revolve around a consumer’s paycheck. The borrower writes a postdated check when he signs an agreement authorizing the lender to withdraw paycheck funds from a bank account.
Pennsylvania Interest Rate: Rules
There are limits to how much interest a lender might charge a borrower. It is the responsibility of The Consumer Discount Company Act to regulate such interest rates. Just like most states, Pennsylvania has its own set of interest rate limitations, which include the following:
- Small loan lenders are not allowed to charge more than 6% interest on short-term loans;
- Some lenders may charge up to 24% interest but will first have to obtain licensure.
The strict rules were implemented to curb these lending companies from charging exorbitant rates. The average interest rate is approximately 300%. Some may even go up to 600%.
The Effect of Laws
These laws on lending have caused a large number of businesses to come to a halt. Most lenders argue that low interest rates do not benefit them. On the other hand, lenders who are providing other types of loans other than cash advances are still expected to follow the guidelines.
The State of Pennsylvania does not have a positive perspective of cash advances. Struggling low-income earners are advised to obtain cash advances by other means.
What Are The Typical Costs of a Loan In Pennsylvania?
The money you borrow is not the only obligation you will have. Interest rates, fees, and other charges will also be applicable. The rate of interest will depend on the type of credit, the lender, and the loan amount.
Late payments also attract additional fees. Some lenders from banks and credit unions will also include application fees and loan disbursement fees.
