Emergencies happen all the time. Payday loans offer consumers a quick financial solution to a temporary and unexpected problem. In many cases, payday loans seem like the perfect solution since there is no credit check and the borrower can receive the funds in a short amount of time. What happens if you already have a payday loan and another emergency occurs? Are you able to get another loan (secondary loan)? It depends on the state in which the lender is licensed.
Several states currently have legislation that prevents borrowers from having multiple outstanding payday loans. These laws are put in place to protect consumers from getting trapped in the cycle of debt that payday loan can cause. In Rhode Island and Tennessee, a borrower is allowed to have only three outstanding payday loans. The maximum number of payday loans per borrower is two in Montana, Kansas, Nebraska, Oklahoma, Iowa, Illinois, and Kentucky. In Utah, Florida, Ohio, and Hawaii a borrower can only have one outstanding payday loan at a time.
Many of the states that have no regulations on the maximum number of outstanding loans are considering creating such legislation. For example, in Virginia, Del. Glenn Odor has filed a bill that will prohibit payday loan companies from lending to borrowers that already have at least three outstanding loans.
Payday loan institutions use a system called Teletrack, an industry-wide tool used by lenders of payday loans to determine if an applicant has outstanding (payday) loans or a bad history with previous loans. The system works across multiple states to let lenders know if applicants have outstanding loans in other states.
While there are some lending institutions that stick to the rules put in place by their state, there are some that look for ways to circumvent the rules. The internet is one of these ways. A payday loan institution can get licensed in a state that does not govern the number of loans and launch a website lending payday loans. The laws put in place by state governments are only effective to a certain extent.
Just because it is possible to obtain multiple payday loans by going around the laws, that doesn’t mean that it’s the best thing to do. In fact, having more than one payday loan can end up being costly for the borrower. If you must get a payday loan, you should pay if off as quickly as possible to avoid paying thousands of dollars in interest and fees.