According to a recent article by the Montgomery Advertiser, 45 Alabama legislators are pushing a bill that would give the power to the people of Alabama to vote on whether payday loan interest rates in Alabama should be capped at 36%
Interest Rates Out of Control
A bi-partisan group of legislators and payday reform advocacy groups gathered at the Alabama State House last Tuesday to introduce the bill that would allow Alabamians to vote on a constitutional amendment that would cap payday loan interest rates at 36%. Currently, the average rate for payday loans is 300%, with a maximum possible rate of 456%. You read that right. There is no missing decimal, 300% to 456%. I guess on the bright side at least we don’t have Texas’s maximum rate of 662% or Ohio’s of 667%.
“Many of these payday loans are rolled over,” said state Rep. Bob Fincher, the bill’s sponsor. “Many of the people end up paying 360 or 400 percent on a loan. Fifty percent of the extended loans are rolled over six times or more. We are entrapping people in poverty and leaving them there.”
Interest Rates Cap
The question of whether to cap interest rates is a good one to address. Many states (15 in fact) have already passed bills to cap interest rates while others have never legalized payday lending.
For those of you that already have a payday or car title loan, what do you do? You may already be experiencing the often cycle of paying more in interest than the original loan amount. You are not alone. Due to the high interest rates, many borrowers get trapped in cycles of repayment. It is a discouraging circumstance and one hard to dig out of. Many situations could have led you to this option; a lost job, a sudden illness/medical bills, unexpected maintenance on your home or vehicle, etc. Without an emergency fund, this may have seemed like your only choice.
First, set a new budget with the aim of paying down the loan amounts without borrowing more money (rolling over). There are lot of free resources on the internet to help you set a monthly budget for your finances. I recommend one with a cash based system but that is my preference. Understand that this is not a quick solution but will take time and effort.
If all your efforts bear no fruit, meaning you can’t make headway under the weight of the interest, or if you have lost your job and are having difficulty paying your credit cards, medical bills or personal loans, not to mention your mortgage and vehicle loans, please call one of our conveniently located offices at Bond & Botes to set up a private consultation with one of our experienced attorneys.
We will analyze your situation and help you make the best decision possible to help you navigate your financial problems.
Grant McNutt is a Managing Attorney at the Bond & Botes Law Offices in Florence and Haleyville, Alabama. He holds a Bachelor of Science from the University of Alabama, and a Juris Doctorate from the Birmingham School of Law. He has been practicing Consumer Bankruptcy Law since 1999. Read his full bio here.