Payday Loan Laws in Illinois
If you live in the state of Illinois and are suffering from temporary liquidity problems, you may be tempted to take a payday loan or an emergency cash advance. However, before opting for this expensive loan, you should assess the pros and cons associated with it so that you are not caught in a debt trap where you keep taking new Illinois payday loans to repay old ones. Increasing instances of families being stuck in the cycle of debt due to roll over loan prompted Illinois State to
pass a law for stronger consumer protection, which came into effect on March 21, 2011.
It is important to note that payday loans are not available in every state and laws and regulations to vary by state. Information for Illinois Payday Loans is provided for your convenience.
The new Illinois payday loan law has proved to be an effective antidote to the worst practices followed by the payday loan industry as it mandates the extension of the loan on the basis of borrower's ability to pay, thus protecting borrowers from limitless loan rollovers. In addition to that, the law created a new type of loan known as the small consumer loan that is cheaper in comparison to standard Illinois payday loans. The small consumer loan is the least expensive of the three types of payday loans available in Illinois. Lenders can charge a maximum of 99% Annual Percentage Rate or APR on this loan, which is much less than the APR on other types of Illinois payday loans – payday installment loans and payday loans.
Thus, even though a small consumer loan is in no way cheap, it is cheaper than a payday installment loan or a payday loan available in the state, both of which have an APR of around 400%. Therefore, it is in your best interest to opt for a small consumer loan in Illinois. These cash advances not only come with a lower interest rate but a longer repayment plan. In most cases, the repayment time extends up to a year thus making it easier for the borrower to manage his or her finances. This is a major point of difference between small consumer loans and traditional Illinois payday loans, as the latter is truly a short-term loan and needs to be repaid in 4 weeks, while payday installment loans have a repayment period of 6 months.
To add to it, the new law limits the monthly payments on this loan to 22.5% of the gross monthly income of the borrower and bars lenders from rolling over the borrower into a new loan within the first 75 days of the small consumer loan term. However, despite this protective law in place, it is highly recommended that you exercise extreme caution while taking out a payday loan in view of the fact that it comes with a very high-interest rate. Moreover, you should take this loan only for overcoming one-off monetary emergencies.
Since Illinois payday loans come with no riders, a borrower is free to use the money in any way that he or she wants. However, it will be unwise to use this expensive cash to meet recurring or luxury expenses. Instead, you should take a small consumer loan for meeting a financial emergency and opt for an amount that you can pay off easily.
Take a look at the benefits of applying for Online Payday Loans if available in your state.