Many find themselves in dire financial straits and don’t have the credit available or the ability to get a loan with a low APR. Often, getting a payday or title loan are the only options they have available to them. Let’s take a look at payday loans in Alabama so you can make an informed decision in case you are ever in this situation.
Rules Governing Loans
According to payday loans, there are approximately 4,884,115 people living in the state of Alabama, Of those roughly 900,000 (18.4% of the population) make less than $24,300 per year, putting them in beneath the poverty level for a family of four. This statistic makes Alabama the fourth poorest state.
There are 12 states in the U.S. that don’t allow payday loans. Of those that do allow these loans, Delaware, Idaho, South Dakota, Utah, Wisconsin and not-surprisingly Nevada have no rules governing those loans when it comes to fees or interest percentages. All other states allow payday loans and have strict rules pertaining to those loans.
Alabama has very stringent rules, but if you think loans will help you get back on your feet, make sure you are aware of the rules and what fees the company can impose. Also, make sure that you will be able to pay off the loan early without too much of a penalty in case you find a financial windfall.
In Alabama, payday and title loans are regulated by the State Banking Department, which helps protect borrowers from predatory lenders.
In 2015, Alabama residents borrowed more than two million dollars in loans, and on average, borrowers had eight loans each; the median loan amount was $322 and fees of $56 were assessed for each loan. Here are some other interesting statistics:
• The highest amount of a loan in Alabama is $500
• The minimum length of time for a loan is 10 days; the maximum is 31
• Only one loan is permitted at a time
• The installment repayment consists of four equal monthly installments
• Four out of five people don’t repay their loan.
Since borrowers don’t check credit reports, they are often lending to those with extremely limited incomes and can’t pay back the loan, which is why the interest rates and fees are so high. They are trying to recoup their losses on unpaid loans.
With nearly 1,100 payday lenders in Alabama, they are certainly making money somehow or else they would cease doing business.
Is a Loan the Right Choice for You?
Some people have no other option than seeking payday or title loans, but if this is the case, make sure you are aware of all the details.
Lenders can charge up to $30 for insufficient funds and they can file criminal proceedings should you try to pay with a closed bank account. Be wary of companies that advertise that they can give you easy money with no credit check as they are praying on low-income residents in need of immediate cash.