To protect their citizens from predatory lending and unmanageable debt, states and cities are stepping up to create and enforce laws to keep lenders in check. The state of Texas has a few laws, and in January 2013, San Antonio implemented and started enforcing stricter lending laws and stipulations regarding payday loans. The following summarizes some of the laws to which lenders must adhere to comply with the laws of the state of Texas and laws for payday loans in San Antonio.
Total Loan Amount
The state of Texas does not have a cap on the amount a payday loan can be. However, San Antonio does. The law states that payday loans may not exceed 20% of an applicant's total monthly income. This means while some services offer loans up to $1,000, a person would legally have to make $5,000 a month to qualify for that amount. While your monthly income affects how much a lender may legally offer you, lenders may also take into consideration your credit as well as payment history on previous loans. Ultimately, the individual lender decides how much it is willing to loan you while not exceeding 20% of your monthly income.
Tip: Despite the amount a lender decides to offer you, you are under no obligation to accept the full amount. It is in your best interest to accept the smallest amount you need.
Payday loans are risky due to their high interest rates. Some states have implemented regulations on APRs, but Texas has yet to do so, and San Antonio does not have regulations either. The average payday loan in San Antonio comes with an APR between 500% and 600%. Some services offer APRs as high as 800% and even over 1000%, but be cautious of these APRs because you can find lower. 300% to 400%, while still extremely high, is a relatively good APR for a payday loan.
Tip: Take the time to read all of the loan offers you receive and shop around to make sure you accept the lowest APR.
Texas state law limits the maximum term of a payday loan to 35 days. However, because the expressed purpose of payday loans is to supplement your finances until your next payday, most lenders set the term of payday loans to your next paycheck. Many require that you have direct deposit so they can withdraw payment the same day, but others may allow you one extra day to deposit your paycheck if you receive a paper check. As with other elements of payday loans in Texas, your lender determines the exact length of your loan and when payments are due, as long as the term does not exceed 35 days.
Lenders may offer rollovers or extensions at their discretion, but San Antonio law states that loans may only be rolled over three times at which point you must finish paying off the loan. Further, if lenders grant a rollover or extension, each of the following payments must reduce the total balance by at least 25%.
Tip: Many services collect automatic payments from your checking account when the term ends and payment is due, so you want to make sure you understand exactly when the term ends and ensure the funds are available in your checking account.
You can find more information on San Antonio payday loans and laws regarding them on government sites and through local media. All services that offer payday loans in San Antonio must adhere to local and state laws.