At times situations arise when cash is urgently needed and there is not enough time to apply for a traditional loan. Or else, bad credit history comes in the way. A payroll cash advance come handy in such situations as this loan is given without a credit check. It must be paid back on the next payday. However, the higher costs of no credit check cash loans attract legislative attention in various forms.
The Legal Status of Quick Cash Advances
In the United States, the pay check cash advancing companies are primarily regulated by individual states. These easy cash advances are legal in 37 states. In the remaining 13 states they are legally not allowed. Where legal, the regulations generally specify the maximum lending rate in terms of annual percentage rate (APR). A $100 loan for two weeks at a charge of $15 implies an annual interest charge of 390%. Stated simply, if the loan is renewed every two weeks for one year, the interest cost will be 15 X 26 = 390 dollars. In October 2006, the US Congress passed a law restricting APR to 36% for lending to military personnel. States also often restrict the number of renewals or number of no credit check cash loans in one year. To help the borrowers, FDIC has also advised it member banks to allow the borrower a longer payment term after six renewals.
What Do Lenders Of Fast Cash Loans Have To Say
Lenders argue that the cash advances without credit checks are the only relief to people with bad credit rating. They argue that the higher cost of lending is justified by the higher risk they are taking. They further argue that their easy advances prevent costlier financial lapses. For instance, they point out that a $100 bounced check typically costs $48, amounting to 1,251% APR; the late fee of $26 on a $100 credit card balance comes out to be 676% APR; and the late/reconnect fee of $50 on a utility bill of $100 translates into 1,300% APR.
What Do The Critics Say
Opponents of the no credit check cash loans argue that higher loan costs often trap the borrowers in a debt cycle. As evidence, they point to a statistical report of the Center for Responsible Lending. The study concluded that the major portion of lenders' profit comes from the repeat borrowers. The other issue they point out at is that the lending companies often claim lower interest costs but ask for additional fee under different pretext.