Colorado Payday Loan Laws
Recently Colorado has joined the list of states that have passed laws to help protect people from the worst parts of payday loans. In a lot of ways the new laws show that the government has paid attention to what has been happening in other states. The new Colorado Payday loan laws strictly limit what lenders can do without putting them right out of business.
Payday loans are simply a loan that has to be paid back when you get your next paycheck. This means that the loan will normally have a period that lasts for only a couple of weeks.
There are a lot of people who don't like the way that these loans work and feel that they are predatory. The main reason for this feeling is that the loans normally come with a very high interest rate.
In some cases the rate will be more than a thousand percent if you were to hold the loan for a full year. Not surprisingly there has been a pretty strong push to regulate these loans.
The other problem that payday loans present is that they tend to become a vicious circle. Once you have taken out one payday loan you will often find yourself in a situation where you need to keep taking them because you have had to use most of your paycheck to pay off the old loan. This tends to undercut the argument that people who support payday loans make that the interest rate isn't really that high since the loan is only held for a couple of weeks. While technically this is true if you have to take a payday loan every pay period then you are in fact holding the loan for a full year.
The new Colorado payday loan laws put strict limits on the interest rate that can be charged. The annual rate can come to no more that forty five percent. This is a huge reduction in the amount that normally has to be paid. The other big change is that loans must now have a repayment period of at least six months. This removes the need to pay the loan back in full on each paycheck and should eliminate the vicious circle.
The laws that have been instituted in Colorado have also been tried in a number of other states, the result has almost always been that the payday loan industry has gone right out of business. This is a problem since there are people who do rely on them as a source of cash. In order to prevent this the new Colorado payday loan laws will allow lenders to charge an origination fee of seventy five dollars as well as a fee of $7.50 for each $100 borrowed up to a maximum of $30. This should allow lenders to make payday loans profitably and keep this source of money open to the people who need it.