How Texas Compares To Other States For Lending Regulations

Payday loans have been a controversial issue ever since they were created. They are also one of the growing industries in the United States due to the state of the economy and people’s need for money. The problem with payday loans is that often, the high interest rates associated with the loans cause more harm for the borrower than help. The regulation of payday loans usually tends to be handled state by state with no real federal regulations in place. There are some states that have prohibited payday loans, however even if they are payday loans are prohibited some lenders operate their business illegally. The states that do not have regulations on the payday loan market are the following.

New Hampshire
New York
New Jersey
New Mexico
South Dakota

In these states, lenders are generally able to charge any price that they find appropriate that the borrower agrees to pay. This means that if a person borrows one hundred dollars and agrees to pay a 60% interest rate. There is no system in place to prevent them from being taken advantage of.

One of the primary arguments against payday loan services is that they exploit people with low-income. That is where the main problem with payday loans occurs. People who need to borrow money for short term expenses will use a payday loan service, and then get stuck in an awful cycle of debt. Lenders and other supporters of payday loans say that pay day loans are lawful because nobody is forcing someone to apply for a payday loan. This is not true for a variety of reasons.

The reason that payday loan services can completely crush a small income community is because they often tend to be the only money lending service available to them. The supporters of payday loans will often say something along the lines of, well why don’t they just apply for a loan from a bank? The problem is, they often can’t. People in low-income communities frequently have bad credit, which makes being qualified for a bank loan very difficult. The other argument supporters of payday loans often have is that, if you don’t want to be charged high interest rates, then just don’t get a payday loan. The issue with that statement is that normally, most people wouldn’t apply for a payday loan. However, there are circumstances that force them to try and find money through any means available. Things come up in everyday life such as car repair needs, sudden medical bills, and other surprise costs that they could not have foreseen.

The other problem with payday loans is that they frequently target people with addictions or other medical health problems. These people will use payday loans to feed their habits. Not only does this hurt them by enabling bad behavior, even if in the future they try to get drug free they still can wind up with thousands of dollars in debts. Payday loans are a malicious market. The states that were listed previously do not have regulations for payday loans. That means that extremely high interest rates can be applied to any borrower if they agree to it.

  • FAQ for borrowers searching for personal loans in Texas

    How do I decide if a personal loan is right for me?

    A personal loan is a significant commitment. Weigh the benefits to decide whether paying interest for the privilege of borrowing money in advance is crucial. Understanding your responsibilities in addition to the reasons for taking out the loan is critical to obligating your future income to make the payments.

    How does a personal loan affect my credit score?

    Hard inquiries performed by creditors are going to knock a few points off your credit score. You can increase your credit score by making timely payments and never missing a single one. Paying late can affect your credit score and block access to future loans. 

    Do personal loans need collateral?

    Personal loans are generally approved based on creditworthiness. Typically designated as “good faith” loans, the lender won’t need collateral to guarantee that you’ll repay what you’ve borrowed. Although riskier for loan issuers, unsecured loans can cripple your ability to access further credit if you fail to repay to completion. 

    Can I change my payment due date?

    Your payment due date will be set when your short-term loan is approved and will be the same date during the month. You won’t be able to change this pre-determined date. 

    What are the different types of short-term financing?

    Short-term loans, trade credit, overdrafts and credit cards are common examples of short-term financing. Typically, the repayment period is as short as a few weeks up to five years in length. Depending on the type of financing (personal loan, unsecured loan, installment loan) and lenders terms, you will generally find many loans are between six to thirty-six months for repayment.