Why Aren’t Cash Advance Loans Subject to Usury Laws?

The short answer is that cash advance loans, and all other types of loans, are subject to the laws in the state where they’re offered. That being said, predatory lenders do exist and they may use tactics to avoid following these laws and interest rate limits. 

The first thing you may be wondering is, what are usury laws? These are laws that regulate how much interest lenders can charge. Each state has its own set of laws for lending and interest rates. There may also be specific laws for specific types of loans like mortgages, payday loans, etc. Regardless, lenders are required to follow these interest rate laws. 

Unfortunately, these usury laws still allow for extremely high APRs in some states. APR stands for annual percentage rate, and it’s essentially the cost of borrowing if you had the loan for an entire calendar year. APR doesn’t just take into account the interest rate, but all of the fees, interest, and charges associated with the loan. This makes it the best way to measure how much the loan will cost you in the long run. So if you’re considering a loan, make sure you understand the APR. 

Because payday loans, title loans, and pawnshop loans have such short repayment periods they tend to have very high APRs. Even if they abide by the interest rate laws, they may add additional fees and charges that will make the APR extremely high. These high fees coupled with short repayment periods make them very difficult to repay on time. 

If you’re in the market for a short-term loan, the most important thing you can do is to research the loan and the lender you’re considering. Follow these simple steps:

  • Look up the laws in your state and compare them to what the lender is offering you. 
  • Research the lender online, check their website
  • Read reviews from people that have had a loan from this lender in the past
  • Read the loan contract thoroughly and make sure you know the APR
  • Ask questions about the loan and don’t sign if you’re unsure

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