The borrower writes a post-dated personal check to the lender to receive cash.
The check is payable to the lender for the amount of the loan plus the loan origination fees and interest.
The loan is due in two weeks. The borrower redeems the check by paying off the loan or lets the lender cash the check. If the borrower cannot repay, the loan can be “renewed.” If the loan is renewed, more fees will be assessed.
Ohio Law Governing Payday Loans
Under the provisions of Ohio law that govern payday loans:
The maximum loan amount is $800 and the maximum loan term is 6 months.
The maximum finance rate and fees are $10 per $100 plus 5% per month.
The finance charge for a 14-day $100 loan is $15, which works out to an APR (annual percentage rate of interest) of 391%.
Alternatives
Credit Card Cash Advance – usually comes with lower interest.
Credit Counseling – 800-388-2227 or visit the National Foundation for Credit Counseling website at: www.nfcc.org .
ModestNeeds. Org – This charity assists “hardworking individuals and families who suddenly find themselves faced with a small, unexpected expense that threatens their ability to remain self-sufficient.” They offer Self-Sufficiency Grants, Back-to-Work Grants, and Independent Living Grants . The grants have “no strings attached and do not ever have to be repaid.” Call 212-463-7042 or visit their website at: www.modestneeds.org .
Credit Union Loans – A “StretchPay” Loan can meet your short-term cash needs. Members pay 18% interest and a yearly fee of $35 (for $250) or $70 (for $500) to enroll. The loan is due in 30 days and, once repaid, members can get another loan with no more fees. Loans repaid timely may improve your credit score. Call 800-486-2917 or visit www.ohiocreditunions.org/Consumer/consumer.htm
To Register a Complaint or Verify a Lender's License
The Ohio Department of Commerce, Division of Financial Institutions. Call them at 866-278-0003 or 614-728-8400, or visit their website at: www.com.state.oh.us/dfi .
Payday Loan Costs Compared to Costs of a Credit Union “Stretch Pay” Loan
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