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North Carolina Installment Loans
As of 2001, North Carolina banned Installment loans and declared them illegal. Ever since they were declared illegal, there have been a lot of amendments which have made it impossible for North Carolina Installment Loans lenders operating illegally to find any loopholes that will allow them to continue their business. Companies that wish to continue giving installment loans have to comply with the state laws and follow the small loan interest cap of 36% annual percentage rate.
The main reason why Installment loans were considered illegal in 2001 was because many people complained of their predatory nature. Many of the borrowers complained of harassment from lenders. The high interest rates that the companies charged were also too high and this posed a significant threat to small businesses. It has taken some time for the government to be able to get rid of all lenders operating illegally. It is only recently that a number of lenders were convicted and held liable for harassing borrowers.
The strict North Carolina laws that prohibit pay day loans, however, do not affect lenders who operate online. The government claims that they are located in a different state and therefore are allowed to offer their services to anyone regardless of their location. Borrowers are therefore cautioned against such lenders because not all of them operate legally.
Given that pay day loans are illegal in North Carolina, does it mean that they cannot access short term cash advances? You can still access short term cash advances from institutions that are authorized to give short term loans but the rates are not as high as those that were charged by Installment loan lenders. What therefore are some of the alternatives that are in place of Installment loans?
1. Credit Union Loans
Credit union leaders were the first financial executives to find an alternative to Installment loans in North Carolina. The North Carolina State Employees' Credit Union in 2001 created the SALO (Salary Advance Loan) program. The program gives borrowers loans without any fee except an interest rate of 12%. Members of a credit union are allowed to borrow a maximum of $500 per month.
The money is to be repaid from the next pay check. For every loan that a borrower requests, it is connected to a SALO account. One advantage of this account is that it deducts 5% of the loan and directs it to a savings account for the borrower so that they can have emergency funds when the need arises.
2. Small Bank Loans
The Small Dollar Loan Pilot Program was launched by Federal Deposit Insurance Corp (FDIC) in 2008. This was a program aimed at showing how banks can offer cheaper financial products such as small dollar loans as opposed to the costlier pay day loans.
31 banks in the United States, including those in North Carolina, are now part of the project. They offer loans of up to $1000 and charge an APR of 36%. Payment periods can be more than one pay check cycle. The main objective of the project is to find out the best short term lending practices that work well in the long run. It is also a creative way of encouraging banks to try out different products.
3. Credit Cash Advance
These cash advances can be expensive but if you shop around, you can get one that has lower interest rates. Due to the high interest rates on credit card cash advance, you should not charge anything else to the card and the balance should be paid off as soon as possible.
4. Credit Counseling
Although this might not really provide instant cash for a borrower, it might help them to manage their finances better and avoid taking a cash advance loan. There are free credit card counseling services which help clients on issues such as rent delinquency management, mortgage default, debt management planning, and budget counseling.
5. Asking For A Payday Advance From An Employer
This is also another alternative to pay day loans whereby an employer gives you a portion of your salary before pay day. It is popular among people because it does not attract high interest rates or lure them into a loan trap. The only drawback of a payday advance is that the next pay check will be lower. Some employers are lenient enough to give their employees loans that can be repaid over several installments so as to lessen the effect on the take-home pay.