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Payday Loans Capped at 36%

Recently the House has passed a bill that will cap the interest that a payday loan company can charge. You might not have heard about this and you might not even know what is going on. Well, this is something that you need to become familiar with which is why we will outline what happened for you and give some positives and negatives of the affect that this will have.

The Outline

This bill that the House passed will set a 36% cap on annualize interest rates for payday loans. Another thing that will happen is that there will be a limited number of times each year that a borrower can borrow from the payday loan companies. This comes on the heels of another House bill that passed. This other bill set up a committee that will look into alternative lending programs for borrowers who currently are living with a low income.

The Positives From This

One thing that this bill set out to do was put a stop to “unreasonable and predatory” lenders who charged high interest that can financially cripple a borrower. Some loan lenders run their interest up to as high as 500% per year. This is definitely something that will help lessen the burden on borrowers who might have trouble paying back their loan anyways. The House does not want lender out there who are looking to jam people for more money at every opportunity. This will also help people avoid the cycle of debt that can be burdensome. This is definitely some positives to take away from this new House bill.

The Negatives From This

This is something that can come back to hurt borrowers as well. If there is a cap on interest then this could force many payday loan lenders out of their business. If you eliminate these businesses then you are also eliminating ways for people to get some helpful funding that they may need in times of trouble. Sure, you are helping them with interest cost but you cannot forget that some people really rely on this form of assistance. They might have bad credit history and payday loans are the only method of help with other loan lenders will not take their business. Overall this is definitely something that could give some benefit to borrows, but also made end up hurting them in the end as well.

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