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What are Payday Loans and Are They Legal?

  • December 3, 2019

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What are Payday Loans

Bounded by Indiana, Missouri, Iowa, and Kentucky, Illinois ranks fifth in the United States in terms of GDP and sixth in terms of population. Illinois is also known for the Abraham Lincoln historic sites, Sears Tower, deep-dish pizza, the world’s largest ketchup bottle, and the first state to ratify the 13th amendment for abolishing slavery.

When you think of the state, Chicago city is the first thought that strikes your mind. And for a good reason, everything converges in the city. In actuality, more than 6 out of 10 people who call Illinois their home, are residing in Chicago.

The state also has one of the highest costs of living in the United States. It is why you see a lot of households taking out payday loans in Illinois. For instance, according to Numbeo, a family of four will spend more than $3,500 on average each month as expenses. If you are single and living alone, you will likely spend $1,000 every month, and that does not include your rent or mortgage.

A one-bedroom apartment in Chicago’s downtown area will cost around $1,800. It goes up to $3,400 for a three-bedroom house. While cable and utilities expenses are below the national average, the city imposes a “cloud tax,” which means you are taxed when you stream movies and games.

When you are living from paycheck to paycheck, you need a lifeline in the form of immediate cash or some help refinancing. Essentially, it is what companies offering payday loans in Illinois are giving.

What is a Payday Loan?

This financial instrument is a short-term loan that will cover your expenses in emergencies until you get your next wage. The payment period is short, which is typically between paychecks. You can get as little as $200 up to $1,000 during the initial application. However, the amount of loan may increase if you have proven yourself to be a good borrower. Of course, you should have enough left from your paycheck to justify the high cost of the loan.

Typically, companies offering payday loans in Illinois do not need to look at your credit score. It is one advantage they hold over banks.

Some of the benefits include:

  • Your loan application gets approved within minutes.
  • Your credit history will improve if you pay your loans diligently.
  • You get the money on the same day.
  • There are no hidden costs.

Also, you do not have to submit voluminous requirements for your loan application. You only need your SSN, government-issued ID, proof of income, and a bank account.

Are Payday Loans Legal in Illinois?

Accrediting payday lending institutions are considered legal in the State of Illinois. According to the rules, the maximum amount you can borrow is $1,000 or a quarter of your gross monthly income. The loan term will vary from a minimum of 13 days to a maximum of 120 days. The finance charge varies, as well. But the law allows up to 15.5% for every $100. So, under those terms, if you borrow $500, you pay back $577.50.

With that said, you need to be careful because some individuals are taking advantage of the dire financial situation of families. They charge enormous interest rates that further bury the families in debt. You need to ask for accreditation from the city or state to make sure you are dealing with a legitimate company. It is also for your protection since the city can revoke their license for illegal practices.