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Payday loans and cash advances are short-term, high-interest loans that can provide quick cash to people in need of financial assistance. However, these loans can also trap borrowers in a cycle of debt, with interest rates often exceeding 400%. In Massachusetts, payday loans and cash advances are heavily regulated to protect consumers from these high interest rates and predatory lending practices.
Payday Loans in Massachusetts
Payday loans are prohibited in Massachusetts under the Small Loan Act, which sets a maximum interest rate of 23% for loans of $6,000 or less. This means that payday lenders are not allowed to operate in the state, and Massachusetts residents cannot legally obtain a payday loan. Additionally, Massachusetts has capped the interest rates for all consumer loans at 20% per year, making it difficult for lenders to charge high rates on any loans they offer.
Cash Advances in Massachusetts
While payday loans are illegal in Massachusetts, cash advances are allowed. Cash advances are similar to payday loans in that they are short-term loans with high interest rates, but they are typically offered by credit card companies instead of payday lenders. In Massachusetts, cash advances are subject to the same interest rate cap of 20% per year that applies to all consumer loans.
Alternatives to Payday Loans and Cash Advances
Although payday loans and cash advances can provide quick cash to those in need, they are often not the best option due to their high interest rates and potential for trapping borrowers in debt. Massachusetts residents in need of financial assistance should consider other options, such as:
Personal loans: Personal loans from banks or credit unions can provide a lower-interest alternative to payday loans and cash advances.
Credit counseling: Credit counseling agencies can help people create a budget and develop a debt repayment plan.
Emergency assistance programs: Many cities and towns in Massachusetts have emergency assistance programs that provide financial assistance to people in need.
Credit cards: While cash advances on credit cards can be expensive, they are often cheaper than payday loans or cash advances. Visit here for more info: https://wmfcu.org/
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