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FAQs on Payday borrowing in California United States

Payday loans are short term loans taken in the time of financial crunch. The idea behind such loan is to provide an emergency cash and getting over with the money crisis. It can also be termed as a “Cash Advance” or “Deferred Deposit”. The borrower issues a check to the lender for the repayment of the loan amount. For example, the borrower issues a check of $300 to a lender, wherein $45 shall be the loan fee and $255 shall be the loan amount. The lender will not cash the check till the next payday which usually is 2 – 4 weeks away.

Payday Loans California

What is the fee charged?

As per the defined laws, a customer can borrow a maximum of $300 as a payday loan in California State. The maximum fee has been capped at 15% which will be at most $45. This 15% fee is equivalent to an APR of 460% for a two week loan duration. This is a major case against the loans as the fee is too high as against standard loans from banks.
APR is the total cost of borrowing. It is the annual interest rate which the borrower pays to the lender inclusive of all fee and charges.

If at all you decide to take a Payday loan

It is important for an individual to exhaust all options before going for such loans. However if there is no option remaining, it is recommended that the borrower should try and avail the least possible amount. Also the loan should be taken after a thorough financial calculation and all efforts must be made to repay it by the next pay cycle date. A new loan from another lender to payback the original loan is strictly not advised since this forms the very basis of a debt trap.

Laws encompassing payday loans in California

– In California, all the payday lenders are required to take license to conduct business. It is an authorization from the Department of Business Oversight to do business in the state.

– The payday lender can only provide one payday loan which cannot exceed $300. The maximum fee which can be charged is 15% or $45 of the total amount of the check. Military service members may have to comply to other rules.

– The lenders are required to post the California License and fee schedule at all their locations across the state.

– The payday lender cannot authorize a new loan to the borrower for the purpose of paying off another loan. – A new payday loan or parallel payday loan is not allowed even when the sum of outstanding balances is less than $300.

– In case of rejection of repayment check due to insufficient funds, the lender can charge a fee up to $15 once. However this restriction is not applicable to the bank of the borrower.

– The lender cannot take request to enhance the tenure of the loan. In any exceptional scenarios, additional fee cannot be levied by the lender.

– Contract of the loan arrangement should be in the same language which is used to negotiate with the lender.

– The lender cannot threaten the borrower of legal consequences in case of insufficient funds.

– Department of Business Oversight provides other forms of legal protection as well under any breach of law by any party.

 

What to do in case of Credit problems?

 

In case of any financial crisis, the following options can be considered before really looking towards the payday loans.
– Checking with the existing creditors and requesting them to waive late payment charges. Try for negotiating and establishing the contract once again with easier payment options.
– Approaching a financial counselor in case of any missed payments or financial troubles. A personalized financial management and monitoring can be worked out so as to recover from the existing crisis.

 

What to do if facing situation like Bankruptcy?

The federal law requires mandatory credit counseling before a declaration of bankruptcy. The United States Department of Justice Trustee Program approves institutions to help individuals and provide mandatory counseling before declaring bankruptcy. It also provides a mandatory debtor education once you declare bankruptcy.

 

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