A payday loan
or paycheck advance is a small, short-term loan that
is intended to cover a borrower's urgent expenses
until their next payday. Typical loans are between
$100 and $1500, are usually on a 2 week term, and
usually have interest rates in the range of 390 percent
to 900 percent (annualized). They are also sometimes
referred to as cash advances, though that term can
also refer to cash provided against a prearranged
line of credit such as a credit card.
Though payday lending
is primarily regulated at the state level, the United
States Congress passed a law in October 2006 that
will cap lending to military personnel at 36% APR.
The Defense Department called the lending "predatory",
and military officers cited concerns that payday lending
exacerbated soldiers' financial challenges, jeopardized
security clearances, and even interfered with deployment
schedules to Iraq.
Some federal banking
regulators and legislators seek to restrict or prohibit
the loans not just for military personnel, but for
all borrowers, because the high costs are viewed as
an unnecessary financial drain on the lower and lower-middle
class populations who are the primary borrowers. |
