Usury Laws and You

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What are usury laws and how do they affect my loan?

Usury Laws and You

When you apply for a cash advance, payday loan or payday advance, it is very important that you are educated about your decision. While these loans can benefit you, you must know what you're doing and who you're getting involved with. The government has created usury laws regarding payday loan companies.

What is a usury law? Usury laws are caps on hard interest rates calculated strictly by APR that the government put in place to regulate the industry and keep companies from setting ridiculously high interest rates. However, some companies get around this law by partnering with banks in other states where usury laws do not exist or have been abolished. Why? Lenders who use this slimy scheme can charge any amount of fees they wish, while still claiming to offer low interest rates. But with, you don't have to worry about unscrupulous companies.

Companies subject to the usury laws must include all fees as part of the interest. This keeps the total fees additional to the loan capped, protecting the consumer. In fact, the government has enacted further legislation to limit lender partnerships with banks. The FDIC has worked to put in place guidelines that require banks to transition short-term loan holders over to long-term loans if those customers go beyond six payday loan renewals.

Some states limit the number of loans you can take at one time, or per year in addition to the FDIC guidelines. This prevents borrowers from staying trapped in a cycle of debt. Use a company like or you could end up paying more than you bargained for.



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