Tough Loans: Arizona Payday Loan Regulations
Over the years payday loans have gotten a bad reputation and for good reason, they are not a good way to borrow money. The result is that a lot of states are now creating regulations to govern the industry. The rules can vary pretty dramatically from one state to another. The Arizona payday loan regulations are some of the most strict anywhere.
The regulations regarding payday loan Regulations in Arizona is that they are effectively no longer allowed. The government of the state has recently introduced regulation that for all practical purposes means that they can no longer be issued. A payday loan is a short term loan that lasts for at most a couple of weeks and has to be paid back in full when you get your next paycheck. These loans usually came with very high interest rates. In most cases if you were to have held the loan for a full year the effective interest rates would be over four hundred percent.
The problem with payday loans is twofold, firstly is the very high interest rate. The second problem is that people tend to get themselves into a situation where they need to keep taking new loans to pay off the old ones. People would usually find that by the time they had paid off the outstanding loan they had very little money left that would allow them to get through to their next payday. That almost always meant that borrowers would have to take another loan, which got people into a cycle they couldn’t get out of. This combined with the high interest rates led the government to view these types of loans as predatory.
Since the government viewed these loans as predatory they decided to put regulations on them. The new rules limit the annual interest rate to no more than thirty six percent. This is a huge reduction from the over four hundred percent that was previously being charged. The other important change in the rules is that loans must now have a minimum repayment period of at least six months. This ensures that borrowers won’t have to pay the loan off in full with each paycheck. These rules are new and not all lenders comply with them, make sure that you check out Payday Loan Facts Arizona so that you you are familiar with the rules and don’t end up taking out a loan that is illegal.
While most people applaud the new rules for helping to put a stop to predatory lending it does create a problem. Most of the payday loan companies have decided that they can’t comply with the new rules and have closed up shop. This means that payday loans are no longer an option for people who need a source of quick cash. Since payday loans were usually the last resort most of these people have no where to turn when they need money.