What Are Personal Loans?
Payday loans for Texas residents same day approval have been around for some time now. It has long been used by those who are in need of cash fast. As the name would suggest this loan is based on the pay check of an individual. When you take out a loan, the term is usually set until you get your next pay check. Then you are expected to pay back the loan in full, plus interest. If you are unable to make payments by then, the terms are extended with an increase in interest as well.
Protected by Law
The good news for Texas residents is that there is a law now in place which aims to limit the negative aspects of this financial product. The Short-Term Loan Act which was approved in 2008 has placed certain restrictions on this form of money lending.
Here are some of the key points of the law that affects borrowers:
Limiting Interest Rates
It limits the interest that can be imposed by lenders to no more than 28%. This is the key feature of the law because it seeks to address the biggest problem with it as seen by many financial experts. Namely that it could place a borrower in jeopardy because of high interest rates that can be added to the loan. Before that, payday companies were able to charge as much as 300% in interest alone.
Limited Amount of Cash
Another key feature that the law has, is the way that it limits the amount that can be borrowed by an individual. The limit has been set to $500. Others might feel that the amount is too low, but some experts would agree with the move because it reduces the chance that a user might borrow that is bigger than what he can really afford to pay back.
Only a Loan at a Time
The law also prohibits a borrower from taking out more than one loan at a time which greatly reduces the risk of a borrower falling into a loan trap. A loan trap is when a borrower is forced to resort to taking out additional loans in order to pay for the previous ones.
There is also another limit that the law puts in place. That is in the number of loans that a borrower can take out each year. They are now limited to 4 loans each year. This reduces the chance that someone would turn to borrowing month after month. It would then be seen as the final option, which is the way it’s supposed to be.
No More Rollovers
Another common practice of payday companies that deal with instant personal loans for Texas residents same day approval that was prohibited by the law are the so called rollovers. This is when the lenders just extend the term of the loan until the borrower is able to pay it in full. They tend to add extra fees to it. Now they are forced to accept partial payments for the loan.
These are just some of the reasons why Texas residents should feel lucky when taking out cash advance loans today. They’ve got the law backing them up.