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Pennsylvania Installment Loans
A installment loan is a short term loan that is often unsecured but you should provide proof of a pay slip. It is taken as a result of an emergency, the loan is processed quite fast, often within twenty four hours and it should be repaid within fourteen days to ninety days.
These kinds of loans often have a high interest rate. In Pennsylvania, installment loans are legal but they are governed by some of the strongest laws in the country to protect people from bankruptcy and too much debt as a result of the high interest rates charged on installment loans.
Installment loans are especially used by people who may not be able to access loans by other financial institutions because of bad credit. installment loan lenders do not carry out a credit check so you will often get the loan that you will request for.
Installment loans work by the lenders giving money to the borrower. The borrower will then give the lender a post dated check, often due on the next payday, with the amount lent and interest and any fees charged.
The check will be cashed on the day that the borrower gets paid. In the state, borrowers are protected by laws that govern the terms of interest and checks issued by the borrower.
In Pennsylvania, the state law prohibits a lender from advancing a loan on a post dated check. Another Pennsylvanian law is the CDCA (Consumer Discount Company Act) which limits the amount of interest that a lender can impose on a loan. This law is especially designed for lenders who do not use the post dated check.
The limit of interest is six percent for Pennsylvania installment loans lenders who are not registered and 24 percent interest for installment loan lenders who are registered and hold a license.
In most cases, installment loans often attract interest of between three hundred and five hundred percent, and in some cases can go as high as one thousand percent.
The CDCA act makes the installment loan business not viable for lenders in the long term because of the low limits of interest rates.
Other laws are that a lender must charge an interest rate of 20 percent and below for the first 300 dollars that a borrower gets.
Any subsequent amount that the borrower gets will be charged at seven and a half percent and not any higher. The laws also dictate that the highest amount that a borrower can get is 400 dollars.
If a borrower wants to renew a loan then the interest rate for the first 300 dollars will be increased to thirty percent. The laws in Pennsylvania also dictate that a lender cannot charge fees of more than 75 dollars on a single loan.
In some cases, some installment loan lenders register their businesses in other states and operate an office in Pennsylvania, in a bid to circumvent the Pennsylvanian laws.
This is especially for internet installment loan lenders. However, in 2008, the Pennsylvania Department of Banking determined that any lender operating in the state is subject to the state laws.
As an alternative to the high lending rates that are installment loans offer, the Pennsylvania Credit Union Association and the Pennsylvania Treasury came up with the Credit Union Better Choice Loan.
This loan is a short term loan that has a longer payment period and far lower interest as compared to installment loans. Some of the features of a Credit Union Better Choice Loan are that you can pay the loan within 90 days and you can make the payments on a monthly basis, a weekly basis or any other rate that you choose, the interest rates and fees of this kind of loan are much lower than installment loans at 28 percent annual interest rates and 20 dollars for fees on a loan.
Other features of a Credit Union Better Choice Loan is that you cannot get another loan before you have cleared the previous one which helps you reduce the amount of debt that you will accrue, you may get an additional amount of 10 percent of your loan which will be deposited in your savings account that earn interest, you may also receive financial counseling from credit unions to help you make sound financial decisions and you will not undergo a credit check or give a collateral before you get the loan.
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