Needing money in a hurry can happen to anyone. Your car breaks down, a medical bill comes up, or your hours get cut at work. Suddenly you’re short on cash just when you need it most. It’s enough to keep you up worrying at night. If this sounds familiar, you’re not alone. Many Mississippi residents find themselves in a temporary financial pinch from time to time. When you need fast access to a few hundred dollars, online payday loans may seem like an easy solution. But are they your best option?
This comprehensive guide will walk you through everything you need to know about payday loans in Mississippi. We’ll explain how they work, their costs, the pros and cons, and alternatives to consider first. Our goal is to arm you with the information you need to make a well-informed decision. Let’s start with the basics.
What Exactly Are Payday Loans?
Payday loans are a type of short-term, high-interest loan designed to provide fast cash until your next paycheck arrives. Also known as cash advances or check loans, payday loans are usually for $100 to $500, depending on your state’s laws. Here’s how they work:
You provide the lender with proof of income and a bank account. They will then issue you a loan for a portion of your paycheck, usually at a rate of $15 to $20 per $100 borrowed. You write them a postdated check or provide authorization to debit your account electronically on a specified due date, typically two to four weeks later. This date is normally set to coincide with your next payday, hence the name. The lender then cashes your check or debits your account to repay the loan plus interest and fees.
Payday loans are designed to be paid off in one lump sum payment, rather than installments over several months. This makes them different than personal loans or lines of credit from a bank. Their convenience comes at a cost — the interest rates are extremely high compared to other loan products. We’ll break down the costs in more detail shortly.
Why Do People Use Payday Loans?
There are a few situations where borrowers commonly find themselves turning to payday lenders. The most common are:
- Unexpected emergencies – A sudden car repair, medical bill, or home repair like a broken water heater or AC unit are common emergencies that strain budgets. Especially for lower income households living paycheck to paycheck, covering these unplanned costs can be very challenging.
- Income disruptions – Hours getting cut at work, the loss of overtime or tips, or temporary job loss can quickly create cash shortfalls. These income disruptions may last only a week or two until finances stabilize again. But that can be long enough to cause missed bill payments or overdraft fees.
- Poor credit/no other options – Those with low credit scores may not qualify for credit cards or personal loans from banks. Payday lenders do only a soft credit check, so it is easier to get approved. For people with no savings as a fallback, payday loans may be their only recourse in a pinch.
While the need for quick cash is understandable, payday loans are rarely the best solution and should be approached with extreme caution, as we’ll explain.
The High Cost of Payday Loans in Mississippi
Payday loans provide fast cash, but speed and convenience come at a very steep price. In Mississippi, state law allows lenders to charge:
- Origination fees up to $18 per $100 borrowed
- Finance charges of up to $21.95 per $100
While rates vary by lender, a typical cost is around $15 to $20 per $100. Although this may not sound too bad at first glance, it translates into astronomical Annual Percentage Rates (APRs).
A $400 loan with a fee of $15 per $100 would cost $60. Over a loan term of 14 days, which is typical, this equates to an APR of 383%! Compare this to the average credit card APR of around 15-30%.
As you can see, the interest charges on even a small payday loan add up quickly. APRs in Mississippi often range from 300% on the low end to over 600% at some lenders — far more than any other legal lending product on the market.
And that’s not all. If you are unable to fully repay the loan on your next pay date, the costs stack even higher. While the law prohibits rollovers in Mississippi, some borrowers will take out a new loan to pay off the old one. This leads to accumulating fees and ever-growing interest costs that become extremely challenging to repay. Let’s look closer at repayment terms.
Repaying Your Loan and Understanding Payment Dates
The benefit of a payday loan is you borrow only what you need and repay it quickly. In Mississippi, payment terms must be between 28 and 30 days. Some other key facts:
- The lender cannot require repayment in full sooner than 28 days after the loan origination date.
- Your payment due date is typically scheduled to coincide with your next pay date, when the lender assumes you will have funds available.
- The lender will cash your postdated check or debit your account electronically on the specified due date. Be sure you have enough in your account to cover the full balance owed.
- Partial payments are not allowed – you must repay the entire loan amount plus all fees in one lump sum.
- If you know you can’t pay on time, contact the lender immediately to discuss options. Late payments incur additional fees.
- Rolling over loans or reborrowing right after repaying a loan should be avoided. This creates a vicious debt cycle and escalating interest costs that become unmanageable.
The bottom line – be certain you will have the full payment amount available on the due date. Payday loans can spiral out of control quickly when they are not repaid on time. Carefully consider what sacrifices you may need to make in your budget the month you take a loan to ensure on-time repayment.
Payday Loan Regulations in Mississippi
To protect consumers, Mississippi regulates payday lending through the Check Cashers Act overseen by the Department of Banking and Consumer Finance. Here are some key protections under state law:
- Max loan amount of $500
- 28 to 30 day minimum loan term
- No rollovers or extensions permitted
- Mandatory 45 day cooling off period between loans
- Lenders cannot pursue criminal charges for returned checks
- Borrowers have the right to cancel by 5pm the next day without fees
- Lenders must clearly disclose all terms and can only charge the permitted origination fees and interest
Reputable online lenders follow all state laws and regulations. Be wary of any lender who tries to skirt these consumer protections.
Pros and Cons of Online Payday Loans
If you’ve determined a payday loan is your best option after reviewing alternatives, online lenders provide some advantages over storefronts:
- Faster approvals and direct deposit of funds within 1 business day
- More privacy than visiting a retail location
- Available anywhere with no need to drive to a physical store
- Easy online access can make overborrowing more tempting
- Potential for lenders outside Mississippi who don’t follow state laws
- Online lender reviews and complaints may be hard to verify
As with any significant financial decision, you want to do your homework and research options thoroughly before providing any personal information.
Payday Loan Alternatives to Consider First
While quick cash may seem tempting, payday loans should be a last resort option after exploring more affordable alternatives:
- Ask your employer for an advance – Some companies will provide a payroll cash advance in a pinch. Even if they charge a small fee, it will be less than a payday loan.
- Payment plan from providers – Contact your utility company, cable provider, cell phone carrier, or other monthly service bills to request a delayed due date or installment plan. Most are willing to work with customers who make a good faith payment.
- Short-term personal loan – Check local banks or credit unions to see if they offer small personal loans with lower interest rates, especially if you have an existing relationship.
- Borrow from family/friends – Ask a relative or friend if they can provide a loan in exchange for repayment at a reasonable interest rate. Even 10% from family is far less than 300-600% from a payday lender.
- Credit counseling services – Reach out to a non-profit credit counseling agency to go over your full budget and identify areas to cut or save. They can also help negotiate payments with creditors.
- Zero-interest credit cards – Many cards offer 0% APR on new purchases for 12-18 months. Transferring other high-interest balances to these cards can provide temporary relief as well. Just be sure to have a payoff plan before the 0% period ends.
The most important takeaway is to fully explore every alternative possible before deciding to take on a payday loan. The high fees and short repayment terms can create tremendous stress. Without a concrete plan to repay it in full, payday loans can easily spiral out of control.
If you’re considering an online payday loan in Mississippi, keep these key points in mind:
- Payday loans have astronomical interest rates, often 400% APR or higher. The fees and finance charges add up extremely quickly.
- Have a solid plan to repay the full balance in one lump sum by the specified due date, usually your next paycheck. Late fees and non-payment can make the costs multiply rapidly.
- Exhaust all other lower-cost borrowing options before resorting to payday lenders as a very last option.
- Only borrow what you can realistically budget to pay back on your next pay date. Don’t take on new obligations until the loan is repaid.
- Follow state regulations and only use licensed MS lenders. Ensure you understand all fees, terms, and your repayment rights before signing anything.
- Payday loans are meant to solve very short-term cash needs. Have a plan to avoid finding yourself in the same tight spot again next month.
With the right expectations and precautions, payday loans can provide emergency relief. But they come at a high price and the risk of falling into long-term debt cycles. Your financial health depends on using them judiciously.
Frequently Asked Questions
Q: How much can I borrow with a payday loan in Mississippi?
A: The maximum loan amount allowed under Mississippi law is $500. Some lenders may offer less. Loan amounts are generally based on your income.
Q: How long do I have to repay a payday loan?
A: The loan term must be between 28 and 30 days under state law. The due date is usually set to align with your next payday.
Q: What happens if I can’t repay my payday loan on time?
A: Contact the lender immediately if you know you can’t make the payment date. While the law prohibits rollovers, late fees and returned check fees can be assessed if not repaid on time. Defaulting can also harm your credit.
Q: Can I get more than one payday loan at a time?
A: There is no prohibition on having multiple loans, however this is not advisable. It is very easy to get overextended. Focus on paying off the first loan before taking another.
Q: Where can I report a bad payday lending experience in Mississippi?
A: If you have an issue with an online or storefront payday lender, file a complaint with the MS Dept. of Banking and Consumer Finance. Their enforcement office investigates violations.
Q: What interest rate will I pay on a Mississippi payday loan?
A: Interest rates vary by lender but generally range from 300% – 600% APR. The maximum charges allowed are $21.95 per $100. Compare costs before choosing a lender.
We hope this guide provided you with a thorough overview of payday lending in Mississippi. The key is being an informed, responsible borrower. Consider all options and use payday loans only as a very short-term last resort when facing an urgent cash crunch.