Although payday loans are illegal in Pennsylvania, including in Lumberville, it’s important to understand why these loans might not be the best choice to meet your financial needs, and what safer alternatives are available to you. In this article, we’ll explore payday loans in Pennsylvania and why they are prohibited, discuss the risks involved when borrowing from a payday lender, and provide alternatives to payday loans that can help you meet your financial goals.
What are payday loans, and why are they prohibited in Pennsylvania?
A payday loan is a short-term loan meant to tide you over until your next paycheck arrives. These loans are usually for small amounts, typically ranging from $50 to $1,000, and are meant to be repaid on the borrower’s next payday. Payday loans are attractive to many borrowers because they are easy to obtain, often requiring nothing more than proof of income and a checking account. However, the high interest rates and fees associated with payday loans can make them very expensive, with some loans carrying APRs of over 400 percent.
In Pennsylvania, payday loans are illegal under the state’s Check Cashing Licensing Act, which prohibits lenders from charging higher interest rates than the state allows. In addition, Pennsylvania’s Consumer Discount Company Act requires lenders who want to lend to Pennsylvania residents to obtain a specific license from the state’s Department of Banking. As a result, payday lenders are not able to operate legally in the state, including in Lumberville.
The dangers of payday loans
The high interest rates and fees associated with payday loans make them a very expensive form of borrowing. For example, if you were to take out a $300 payday loan with a 14-day term in a state where payday lending is legal, you might end up paying $45 in fees — meaning you’d have to pay back a total of $345. If you weren’t able to repay the loan on time, you could end up rolling over the loan and paying even more in fees and interest.
Some of the other risks associated with payday loans include:
- Debt traps: Because payday loans are set up to be repaid on your next payday, many borrowers end up having to take out another loan to repay the first one. This can lead to a cycle of debt that is difficult to escape.
- Harassment from lenders: Some borrowers have reported being harassed by payday lenders, including being threatened with legal action or being told they will be arrested.
- Identity theft: Some payday lenders require borrowers to provide sensitive financial information, including bank account and Social Security numbers, which could be used for identity theft.
Alternatives to payday loans in Lumberville, Pennsylvania
If you’re considering a payday loan in Lumberville, Pennsylvania, it’s important to explore alternatives that might be both safer and less expensive. Some options to consider include:
- Personal loans: Depending on your credit score and income, you may be eligible for a personal loan from a bank or credit union. These loans typically have lower interest rates and fees than payday loans, and can be paid back in installments over time.
- Credit counseling: A credit counseling service can help you develop a budget, negotiate with your creditors, and come up with a repayment plan that works for you.
- Pawn loans: If you have valuable items to use as collateral, you might consider taking out a pawn loan instead of a payday loan. Pawn loans typically have lower interest rates and longer repayment terms than payday loans.
- Friends and family: If you have friends or family members who are willing and able to lend you money, this might be a good alternative to a payday loan. Be sure to work out the terms of the loan in writing, and stick to the repayment schedule.
Interesting facts and statistics about Payday loans in Lumberville, Pennsylvania
Although payday loans are illegal in Pennsylvania, here are some interesting facts and statistics about them:
- In 2016, Pennsylvania Attorney General Josh Shapiro sued Think Finance, a payday lending operation that allegedly charged Pennsylvania consumers interest rates of up to 448 percent.
- Even though payday lending is illegal in Pennsylvania, some lenders are still able to operate by exploiting loopholes in state law. This can make it difficult for authorities to crack down on these lenders.
- A 2016 Pew Charitable Trusts study found that the average payday loan borrower takes out eight loans of $375 each per year, and spends $520 on interest and fees alone.
- In Pennsylvania, the maximum annual percentage rate (APR) for a personal loan is capped at 36 percent, compared to the typical APRs of up to 400 percent charged by payday lenders.
‘Apply Now’ section
If you’re in need of emergency funds in Lumberville, Pennsylvania, there are alternatives to payday loans. At TheGuaranteedLoans, we can connect you with reputable lenders offering personal loans that may fit your needs. To get started, fill out our simple online application form, and we’ll match you with lenders who may be able to help. Remember, we are a connector service and not a direct lender, so you can rest assured that your information is safe and secure with us.