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The lawmakers from Florida want to change the rules of payday loans. They want to increase the sum people may borrow from the organizations that provide payday loans. Still, many people are arguing over this initiative, thinking that this new law may bring more harm than good.
Payday loans have always been a stumbling block for common people and politicians. Many of them believe that payday loans are a good source of money for those who need it immediately. On the contrary, other people think that payday loans may lead you to a debt hole. They say that by taking a payday loan a person starts an endless circle of reborrowing.
The lawmakers from Florida do not think so. They have introduced a bill that presupposes the increase in the amount of money that people can borrow as a payday loan. So, what are the pros and cons of this bill?
As it has already been said a payday loan may be a good way out for those who are short of money but really need it right now. In addition, people who cannot take any credit from conventional banks because of a low score or other reasons find this option really suitable.
If the legislation of Florida approves the new bill concerning payday loans, these people will have a possibility to take more money. The maximum sum people can take now is 500 dollars, but it may increase up to 1000 dollars. Moreover, the terms of repayment will also rise from 30 days up to 60 or even 90.
Now the legislation of Florida forbids issuing loans to people who have any other outstanding loan or to who have repaid their last loan fully in past 24 hours. Lawmakers say that they are going to preserve these restrictions for taking a payday loan in the new bill. So, these restrictions may prevent people who are not able to repay from taking a payday loan and somehow to ensure the debt repayment for the lending organizations.
Today the maximum sum of a payday loan is 500 dollars. If a person borrows this money from a lending organization, this person will have to pay total 50 dollars of fees, and the final sum of repayment will be 550 dollars. You may think that borrowing 1000 dollars, you will have to pay 100 dollars of fees that is quite logical, but in fact, the bigger sum you borrow, the higher your fees are. It means that if you take payday loan in amount of 1000 dollars, your fee will be 216 dollars.
It is said that the new bill requires lower annual percentage rate for payday loans. Now this rate is 300 per cent, but the bill will provide 200 per cent of annual percentage rate. We can treat it as an advantage, but many experts believe that, on the contrary, this measure can attract more people to use payday loans and, thus, increase the number of people who are dependent on loans.
Experts believe that the industry of payday loans gets more than 300 million dollars in fees from their customers. If the maximum sum of a loan is doubled, the amount of fees charged may also increase more than twice. And it means that the industry of payday loans will expand. Many researchers do not believe that this expansion may be a good sign, because in this situation these lending organizations acquire more customers and more people will live on a loan. And it may harm the economy of the country.
As we can see, the new bill has its advantages and disadvantages. The increase in the amount of a loan may be a good thing for people who need money and who are able to repay their loan. But people who do not have enough money to pay their loans back are risking falling into a trap or reborrowing. It means that having no money to repay their debt, they would have to go to another lending organization to take another loan and repay the first one.