What does a payday loan mean?
Payday loans are essentially short-term loans that are easy to apply and quick in disbursal. They are mostly due for payment at the time of getting your paycheck. Though payday loans of up to $1250 can be approved very quickly, they are not as flexible as the other standard loans.
They don’t work like your regular loans. The record of many types of loans may be kept for 7-10 years, but Payday lenders don’t do that. They don’t report to the credit bureaus even in the case of overdue repayments by the customer, Like it online payday loans texas.
These payday loans don’t show up on your credit records of three major credit reporting agencies TransUnion, Equifax, or Experian. However, in order to avoid any problem, you should repay your loan. Also, companies giving payday loans can check with your employer about your income levels, even though it is not a regular practice.
Working model of a payday loan
A number of lending companies offer payday loans at simple conditions. The loans are given for at least 6 months, and depending on whether you receive your income bi-weekly, semi-monthly, or monthly, the loan installment can range anywhere from 5 to 11.
The state of Texas governs all these applicable laws. It is important to remember that any money obtained through the title of an auto loan or any other short term loan cannot be used to meet other long term financial expenses or requirements. You also need to know that your salary cannot be confiscated in any way for not repaying a loan. This can be done by the lender if and only if there is a court order for the same.
What happens when you don’t pay back?
Most of the lenders do not bother to check the credit score or payment track record of the borrower before lending. Thus, if you don’t end up paying your loan installments, your credit score will worsen. It will also reduce the possibility of you getting a new loan in the future, and even if you get one, the asking interest rate would be very high.
Legalities of payment default
If you don’t pay back a payday loan, there is a possibility that the lender can sue you for it in court. However, this is not the usual practice. The laws in Texas do not allow a borrower to be charged in court on a criminal case for non-payment of payday loans. However, there is a likelihood of being charged with civil litigation. As a result, you cannot be carefree, and you do run the risk of being bankrupt.
It is vital to know, however, that irrespective of the action taken by the lender in case of you defaulting, you can always stop them from not automatically debiting the money from your checking account. This is necessary because these kinds of transactions in your checking account can lead to additional finance and interest charges, and the lender cannot be held accountable for those.
Texas Regulations for Payday Loans
The regulations for Payday loans in Texas are not at all complicated, and the simple rules and guidelines have made the payday loan industry flourish over time. A number of small storefronts and companies have entered the market because the process is legal and smooth.
Since there is no upper limit on the interest rate that can be charged, the interest rates are sometimes as high as 662% on an APR basis. In addition to the interest rate, the lenders can also charge a fee for disbursing the loan. The only regulation is to disclose all the details and charges transparently to the borrower beforehand. The lenders also need to have a valid license.
How does it help the borrowers?
In case of any default or payment issues between the lender and the borrower, the issue needs to be first fixed by the lender himself, as per law. If the borrower and lender are unable to find an amicable solution, the case is handled by two regulatory bodies. The major one is the Texas Office of Consumer Credit Commissioner (OCCC).
This body allows the borrowers to file a case against the payday loan lender. This can be done online or offline by downloading, filling, and submitting a form. The Texas Attorney General’s office provides all legal assistance in these matters.