Payday loan laws of North Dakota do cover limits of 60 days on the length of payday loans.
They also have a limit of $500.00 per loan. They do not limit how many loans a person may take out at one time.
The interest rates and the lack of any limits on roll overs is what can get a borrower in trouble rather quickly.
Loan companies are allowed to charge a 20% loan fee plus a database fee to be determined by the loan company, plus 30% of the loan total in interest.
Lets do the math on a 2 week $200.00 loan.
- 20% of $200.00 is $40.00,
- 30% of $200.00 is $60.00
- Database fee of $45.00
- Total to borrow $200.00 for 2 weeks is $145.00
So the total payback of a 2 week $200.00 loan is $345.00
Wait, something else came up and now we must roll this loan over.
- Roll over fee $45.00
- Database fee $45.00
- Total to roll this loan over $90.00
Remember, now in two weeks the total due is still $345.00, and if the borrower pays this off in full on this next due date they will have spent $235.00 to borrow $200.00 for 4 weeks.
But wait! The borrower still has 30 days left of the 60 days they can have this loan active for and something else has come up, so they decide to roll the loan over one more time……..
Cab you see how crazy this cycle is? We call this the payday loan trap and once a person gets stuck in it it can become brutal for the borrower.
The average borrower rolls over a payday loan between 4 to 5 times, and if you keep doing the math this is on a path to financial trouble. If you add in any bounced payments to the loan company manado, then add bank charges, and on and on, you have a mess for sure.