Michigan Payday Loan Laws and Legislation

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A payday loan presupposes a considerably small amount of cash given to a borrower under high interest for a short period of time against his next paycheck. Such loans are very convenient in cases of emergency and are frequently applied by people. However they are really very expensive and can lead to financial problems. This is the reason behind a lot of discussions about payday loans and also behind the laws that prohibit operation of payday lending companies in many states.

In the state of Michigan payday loans are considered legal, however, there are certain limitations with which lenders should apply. Maximum amount of loan is $600 taken from a single lender. Borrowers are allowed to have not more than two outstanding loans, although, from different lenders.

Payday loans can be given for a period no longer than 31 days; no extensions are allowed above it. In case a borrower cannot repay in time and his outstanding number of loans equals 8 for a period of 12 months, an installment payback plan should be requested. Basically, lenders charge $15 for such services. Moreover, it is also legal for lenders to charge a $25 insufficient funds fee in case of defaulted repayment. The borrower is still responsible for the repayment and may be subject to collection actions from the lender.

Interest charges for payday loans in the state of Michigan go as follows: 15% charge is for the first $100, while the second $100 is granted at 14%, the third $100 at 13%, the fourth $100 at 12%. All the loans over $400 are issued at 11%. Verification fee equates 45 cent with some lenders.

A borrower is also eligible to notify a lender with a letter in case the former considers that the latter was operating against the law. In such case a lender has got three days for a decision. In case a lender admits the violation, he should pay a borrower five times the fee (minimum $15) associated with the loan.

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