Sunday, August 26, 2012

Think 3x before Accepting a Payday Loan 3/3


This is the 3rd installment of a 3 part series on Payday Loans

(3) Think it over for 24 hours. You have until the next day the payday lender is open to cancel your loan (return the money and get your check back). 

This may not be true in every state, so check your home state's regulations. In Washington, though, you have 24 hours to change your mind. The Department of Financial Institutions maintains a web page on payday loans that details duties of lenders and borrowers under Washington law. Washington's law reads: 

RCW 31.45.086

Small loans — Right of rescission.

A borrower may rescind a loan, on or before the close of business on the next day of business at the location where the loan was originated, by returning the principal in cash or the original check disbursed by the licensee to fund the small loan. The licensee may not charge the borrower for rescinding the loan and shall return to the borrower any postdated check taken as security for the loan or any electronic equivalent. The licensee shall conspicuously disclose to the borrower this right of rescission in writing in the small loan agreement or small loan note.

Because of the extreme ease of getting a payday loan, lawmakers decided to give up time to catch our breath and think. Turns out, the ancient wisdom that "sleeping on a problem" helps you find better solutions is getting modern scientific support. It makes sense: the longer we give ourselves before we are fully committed the more time important issues or potential solutions have to percolate up from less-than-conscious regions of our minds. 

Payday lenders would prefer their potential customers not think. Their goal is to get us started on a loan and they profit when we have a hard time paying it off on time or have to return for more loans later. 

Our goal is to manage our financial affairs well enough that we don't ever need quick loans. Payday lenders have motives at cross-purposes to our own. They want us to forget our motives and succumb to following theirs. Use all the time you have to see how you can hold firm to your goals.

Summary

Thinking will save you money in several ways: 
  • Reasonable rates for a loan saves money on interest costs
  • Making timely payments avoid penalties 
  • Changing your mind should you decide you don't need the loan sidesteps the problem of how to repay it.
I'll end this series on payday loans with something else to think about:

 Paying interest is like buying nothing.
~ Sheri O. Zampelli