Michigan history shows the limit of payday loan service. The law tried to limit the ceiling on interest rates to 25%. In 2005, Michigan was the last state to allow payday loans at rates of 340% APR or more. But nowadays, this state is in the list of states colored in red on the loan card. If a customer asks online payday loans, the APR will be equal to 370%.
As a result, the Michiganders face the payday loan debt trap if they issue a short-term $ 300 loan (on average, that’s a 14-day term). Nowadays, citizens of this state believe that only a new accepted interest rate cap of 36% will help break the lending trap.
The opinion on interest limits was not unanimous. Some of them believe that these restrictions protect consumers from accessing fast credit. Others claim that it will prevent people from issuing quick loan options, especially in difficult financial situations.
So Michigan citizens sometimes find themselves in an ambiguous situation: If you run out of funds until the end of the month, you don’t have relatives or friends to borrow money, but you don’t have the possibility of issuing a short term personal loan because of the the rates.
But it will not be conducted among the citizens to see the real picture. As it has been clarified, many people use the payday loan as the main way out of a difficult life situation. They adapt to the terms and rates offered by many American lenders.
What to choose: an interest limit or the possibility of issuing rapid cash advances?
Every state, including Michigan, should weigh the pros and cons of the future law and its impact on Americans. There are times when people cannot find any other way out than online credit. In addition, not all customers are eligible to subscribe to a banking product as it sets strict conditions to benefit from it.
If you go to a bank, you have to provide many certificates, papers. In addition, requests are reviewed for up to 14 business days. Such credits are only justified if you are going to issue a mortgage or a car loan. One more reason is to borrow large amounts over the long term.
Payday loans, by definition and practice, are short-term financial products, they are not applicable for periods longer than 30 calendar days. The long-term APR offered by the banks seems to be much more favorable.
Each borrower can find another way to issue financial products. It is a credit union. He fought for lower rates and had some success.
Another option to reduce the debt trap is to apply a 30 day “cooling off period”. You cannot submit a claim for 30 days from the time the first credit has been paid successfully.
There are many options to limit the rates, the debt trap and we cannot pretend that interest rate caps are the only possible initiative.