In 2008, Ohio approved the Short-Term Loan Act, which limited the interest rate on payday loans to 28 percent. Prior to this, payday loans charged upward of 300 percent in interest and fees. Now, there’s a limit of four loans in a year and one outstanding loan at a time. And today, a borrower can only borrow up to $500 per loan. The law also says no more than two loans can be made to a borrower in 90 days. According to the Consumer Financial Protection Bureau, before the Short-Term Loan Act was passed a borrower took out an average of eight loans a year at $375 per loan. Lenders collect more than seven billions dollars in fees on an annual basis.
Your Better Business Bureau offers alternatives to payday loans:
Consider a budget. Subtract your expenses from your income to determine your budget. Work with your budget until you have a positive amount remaining.
Pay yourself first. Set aside a little each month into a savings account.
Consider a loan from your local bank or credit union. You could also turn to family or friends for a loan.
Look for extra work. Taking on a second or third job could help with expenses.
Call your creditors and ask for more time to pay bills. Find out if they'll charge an extra fee for this flexibility.
Contact a consumer credit counseling service to help you create a debt repayment plan.
Remember, if you do need to take out a payday loan, only take out as much as you can afford to pay back with your next paycheck.
Before signing on the bottom line for any loan, check the lender out with your BBB. Visit www.bbb.org or call (937) 222-5825 or (800) 776-5301.
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