♥ Princessa's Royal Diary ♥ - Royalty has never been so PINK!

I've like said this more then a million times. A payday loan is, in short, a quick and easy way to bridge your cash needs between pay days.

(If you have a standard pay day, unlike me.)

It is a small short-term loan that can range from tens to a couple of hundreds. The money can be electronically deposited and repaid from your bank account on mutually agreed upon dates.

Here's something good to know - "Payday Loan Reforms in Law".

According to the article, in the past several years, the amount of payday loan lenders has sky rocketed.

There are now more payday loan lenders because of the profitable return rate on their short term loans. (Since the service is so convenient, many companies have cashed in on the idea of payday lending.)

However, the rapid growth in lenders has caused Congress to enforce laws to prevent payday loan companies from taking advantage of their vulnerable customers.

First, the government pushed for states to put caps on interest rates. However, several states deregulated the caps in fear of lenders moving out of state.

Although the caps seemed beneficial to consumers, many lending companies were including hidden fees into the loans. This caused a reform, which balanced Congress' intervention and state governments push for deregulation.

Each state falls within one of the 3 categories of loan regulation.

The 1st category ensures that all payday lenders follow the state's small loan laws.

Usually, under these laws the interest cap is set low-usually less than 36%. Also, these laws regulate lengths of the loans, along with prohibiting contract revisions by the lenders.

This category of payday lending makes it virtually impossible for companies issuing payday loans to make profit. It is a way for states to force payday lenders to be fair to their customers.

The 2nd category includes the states that allow lenders and consumers to agree on any interest amount.

Each lender can modify their interest rates as long as the borrower consents to that amount. However, states that follow category two still always abide by the state's small loan acts.

The 3rd category allows pay day lending, but puts certain restrictions on it.

The states that abide by category three have maximum interest amounts. For example, North Carolina can only charge up to 15% on a maximum loan of $300.

By setting maximums, the government is able to regulate how much consumers are being charged for lending services. Also, by setting a maximum loan amount, the government can regulate how much debt a person can be in with a lending company.

In every category, there are laws that protect the borrower from spiraling into long term debt. The government intervention has helped many people from becoming over their head in debt, while still allowing them cash advances if they need them.

I wonder if all this applies to Singapore as well? Then again, I've not really heard about payday loans around here much.