Georgia is one of the states where payday lending is illegal. Georgia has effectively banned payday lending throughout the state, while certain installment loans are still allowed. Payday lending is an industry that many states have chosen to regulate, or ban entirely. However, there are still states where payday lending is allowed. We always recommend learning the laws and regulations in your state, as every state is different.
So why is this industry so heavily regulated? The short answer is that payday loans can be very costly and dangerous for borrowers. The longer explanation involves two main reasons: high APRs and short repayment periods that lead to rollover.
Payday loans are known for having very high APRs, or annual percentage rates. The annual percentage rate is essentially the cost of the loan if you were to have it for an entire calendar year. The APR takes into account the interest rate as well as other fees and charges associated with the loan. Payday lenders tend to offer very high interest rates because many of the borrowers who rely on them happen to have poor credit and don’t have many other options.
The other reason payday loans can be risky is that borrowers don’t have very much time to repay them. Typically, payday loans need to be repaid within two weeks, or by the borrower’s next payday. This can be very challenging for borrowers in need. And the fact that the APRs are so high makes it even more difficult. And when a borrower can’t repay by the due date, many lenders offer to “roll over” the loan to a new term. This means extending the loan and adding more interest and fees. Loan rollover can create a cycle of debt that’s tough to escape.
Before choosing a payday loan, or any loan for that matter, we always recommend exploring all of your options. Consider borrowing from a friend or family member, visit a credit union, or explore persona installment loans.