When unforeseen expenses occur, people start looking for a source of additional financing. The lack of savings by many individuals and families and a bad credit score make payday loans one of the most popular solutions for extra cash. However, this financing option is known for its excessive interest rates, often resulting in people getting into a cycle of debt.
Many states forbid payday lenders on their territories. New York, North Carolina, Montana, Georgia, Colorado, Arizona, New Mexico, West Virginia, and several other states have imposed restrictions on payday lenders to protect consumers. Are payday loans legal in NJ? Keep reading to explore New Jersey usury laws and learn about the status of payday lending in the state.
How Does a Payday Loan Work?
A payday loan is a short-term loan that allows you to borrow additional cash by your next paycheck. Online payday lenders charge an initial fee from a client and deposit the money in one lump sum directly to their bank account. With payday loans, you can borrow from an instant $100 cash advance to a $1,000 loan to pay rent, medical or utility bills, finance vacation, or cover other minor expenses.
Customers generally receive the funds as soon as the next business day. The repayment period of these small loans usually takes 30 days. A borrower needs to return the principal with an interest rate reaching 400% APR (annual percentage rate). If they can't repay the money to payday lenders on time, they pay a rollover fee to extend the due date or take another consumer loan to return the previous one.
New Jersey Usury Laws
New Jersey laws set a ceiling on permissible interest rates on long-term and short-term loans. The state has two separate types of usury (charging excessively high-interest rates): civil usury and criminal usury. According to the civil usury, the maximum legal interest rate in New Jersey is 6% per annum on loans not evidenced by a written agreement and 16% per annum if there is a written loan agreement containing information about an interest rate.
Criminal usury determines charging more than 30% on consumer loans and more than 50% on business loans as a crime in the state.
Legal Status of Payday Loans in New Jersey
New Jersey is among the American states that forbid payday lending on their territories. New Jersey payday loan laws prohibit excessive interest rates on this small loan. The annual interest rate of any short-term loans, which are alternatives to payday loans in New Jersey, can't exceed 30%, making borrowing extra money safer for borrowers and protecting them from getting into a cycle of debt. Furthermore, the Check Cashers Regulatory Act prohibits check casher businesses from advancing money on a post-dated check. Eligibility Criteria for a Payday Cash Advance in New Jersey
Unlike many other short-term cash loans, payday loans have only basic requirements. To get extra cash in New Jersey before their next paycheck, borrowers need to meet the following eligibility criteria:
- Be a U.S. citizen or permanent resident;
- Be at least 18 years of age;
- Have proof of stable income;
- Have an active bank account (savings account or checking account);
- Have a phone number and email address.
How to Apply for a Payday Loan in New Jersey?
Borrowers appreciate payday lending for the speed and simplicity of the application process. To receive the necessary loan amount, you need to take the following three steps:
Step 1. Fill out an application form with your personal information and bank account details and submit it;
Step 2. Get a response from a direct lender if your loan request is approved and sign a loan agreement;
Step 3. Receive the cash within one business day.
!an I Borrow a Payday Loan in New Jersey with Poor Credit?
Unlike banks and credit unions, payday lenders allow bad and poor credit borrowers to access extra cash. They don't perform a hard credit check to make a loan decision. Instead, they focus on the borrower's steady income. If you meet this and other lender's criteria, you can get a payday loan even with a bad credit report.
Although even individuals with good credit can't borrow payday loans in New Jersey, you can still obtain a quick cash advance with a credit score below 580. Many lenders approve borrowers with fair credit ratings.
Payday loans, like other bad credit loan options, are often expensive. Make sure you can repay it to avoid extra fees and hurting your credit.
Can I Get a Payday Loan in NJ with No Credit Check?
Payday loans is not an option in NJ. However, you can get small loans from alternative lenders that do not require a hard credit inquiry. However, they still need to assess the repayment risk. They conduct soft credit checks to see if you can make an on-time payment and return the loan with an interest rate and other charges. In addition to proving your creditworthiness to the lender, it protects you from getting caught in a debt trap.What Happens if You Can't Repay a Payday Loan in New Jersey?
Payday loans are an expensive borrowing option due to their high fees and interest rates. Therefore, they are prohibited in NJ. However, unexpected expenses occur, and if you can't repay a loan on time, the lender can have electronic access to your bank account and withdraw the money with interest and fees. Borrowers usually give access to lenders when signing a loan agreement.
A late or missed payment can also negatively impact your credit score. It is crucial to read the contract carefully before signing to be prepared for any finance charge by a lender and repay the total loan cost on time.
Payday Lending Fraud
Expensive fees and the risk of getting caught in a debt trap are not the only drawbacks of payday lending. Fraud within the industry is one of the most common problems borrowers face. If you see NJ payday loans, you should be aware they are illegal. It is essential to choose a lender carefully regardless of the type of loan you borrow. It will help you avoid a situation when they make you pay fees and then disappear.Are Tribal Lenders Legal in New Jersey?
Tribal loans are loans that come from lenders owned by Native American tribes on tribal land. Native American tribes are considered sovereign nations within the United States by the federal government. Therefore, they govern themselves and have immunity from state or federal lending laws. It allows tribal lenders to charge interest rates higher than legal limits on the state.
Tribal loans are illegal in New Jersey. While it does not stop the lenders from operating within the state, it makes their loan agreements enforceable in courts. As tribal lenders don't have lending licenses, they can't force you to pay or garnish your wages.
Consumer Information
The state's authorities aim to protect their consumers against predatory lenders. The New Jersey Department of Banking & Insurance is responsible for overseeing financial institutions in the state. Their Division of Banking has an Office of Consumer Finance that regulates financial services for clients. The Bottom Line: Should You Apply for Payday Loans in NJ?
Covering a $1,000 unforeseen expense is challenging for around 57% of Americans. Although the answer to the question Are payday loans legal in NJ? is No, these short-term loans are still a popular financing solution for many borrowers.
The state law set specific limits on payday lending to protect consumers. However, it is still crucial to borrow money from a lender only as a last resort. Read your contract with the lender carefully to see the total loan cost and ensure you can repay your loan debt with an interest rate by the due date.
FAQ
What Are Alternatives to Payday Loans in New Jersey?
As payday lending is restricted in New Jersey, you can borrow money from your family or friends, apply for a personal loan from a credit union or bank, or use payday alternative loans, installment loans, or credit card cash advances. What Are the Drawbacks of Payday Lending?
Payday loans are a risky borrowing option due to their high interest charges, short repayment period, potential debt cycles, fees, unauthorized withdrawals, and negative impact on credit scores.Is Borrowing from Payday Lenders Legal?
Payday lending status differs depending on the region. Each state government creates its own regulations for payday loans. Therefore, it is necessary to check your state's law before applying for extra cash from payday lenders. Do Payday Loans Affect Your Credit Score?
Although payday lenders don't perform hard credit checks, late or missed payments can negatively impact your credit score. Is a Payday Loan Secured or Unsecured?
One of the main advantages of payday lending is that loan providers don't require collateral or borrowing against a valuable item from a borrower. Lenders make a loan decision based on your income and creditworthiness.
