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Payday loan limits rise in Tennessee

[Sep 9, 2011.]


If you live in Tennessee, you can now borrow up to $500 in one payday loan, up from the previous limit of $200. In many areas of the country, legislators have opted to enact laws that reduce consumer access to instant payday loans, but in Tennessee, the lawmakers recognized that one of the dangers of payday loans is that borrowers tend to take out more than one of these loans from different lenders. By raising the limit, borrowers may need to request only one payday advance loan.

According to the Times Free Press in Chattanooga, payday loan businesses can now charge up to $75 in fees on a $500 loan. The article quotes Jabo Cobert, vice president of public and government relations for Check into Cash, the third largest payday lender in the country, explaining the importance of increasing payday loan limits.

"The law hadn't been changed in a decade even though the top reasons for payday loans--unexpected car repairs and medical bills--have gone up significantly," said Cobert.

Payday loan dangers

Consumer advocates are concerned about two issues when it comes to payday loans: a high interest rate and the propensity of payday loan borrowers to take out multiple payday loans that they cannot repay. Although high interest rates are an issue for borrowers who do not repay their loans on time and need to extend their repayment, payday loans are generally meant to be repaid within 30 days. If you can pay them back quickly enough, the interest you pay will not be exorbitant.

Taking out multiple payday loans can be a big problem, since you risk not having enough money from your paycheck to repay all the loans. A researcher at Vanderbilt University, Paige Skiba, an assistant professor of law, was quoted by the Times Free Press expressing her opinion that larger payday loans can be useful.

"When people are allowed to borrow larger amounts, it actually helps them to repay the loan rather than renewing it a bunch of times and then eventually defaulting," said Skiba.

Handling your payday loans

The cycle of debt created by a series of payday loans can be difficult to get out of, so the best step is to limit your use of payday advance loans to true emergencies. If you are regularly relying on payday loans, you should view that as a sign that you need to seriously review your finances and find a way to create an emergency savings fund.

One of the best ways to create a savings fund is to automatically have a certain percentage (such as 5 or 10 percent) or a specific amount transferred from each paycheck into a savings account. This may be difficult at first, but soon you will get used to living on a little bit less and watching your emergency fund rise. If you can manage to have $50 transferred every two weeks, at the end of one year you will have at least $1,300 in your savings account. Next time you need to pay for a prescription or to fix your car, you'll have the money available instead of needing a payday loan.


About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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