A cash advance has also known as a payday loan. The term is derived from the fact that the borrower is asking for a loan that is usually payable within the same period of time that he receives his paycheck (i.e. weekly, bi-weekly, monthly, etc.). Of course, it does not always need to coincide exactly with the borrowers pay date. Also, a payday lender bases the maximum loanable amount on the state threshold amount and a percentage of the regular income or salary of the borrower.
The operative law is the Small Loans Act. This law applies to loans above $500. The lender has to comply with usury laws (i.e. 36% maximum Annual Percentage Rate), other relevant regulations, and prohibitions. If a lender provides a personal unsecured loan below $500, even if their principal business is to provide for small loans, then they can charge higher than36% APR. This makes it extremely hard for small loan providers to operate within Alaska. To date there are 19 other states that have similar laws in place to prohibit, or at least make it unprofitable to undertake, small loan enterprises.
The principal law that governs these loans is the Alaska Stat. §§ 06.50.010 et seq. These loans do not need to comply with the Small Loans Act requirement of a 36% APR cap. To be more specific, a payday loan:
Some lenders call themselves payday lenders but advance more than $500 to their borrowers. Then, they charge APRs above 36%. Under existing laws, this is illegal. Nevertheless, they mask their activities by purporting to operate under Alaska payday loans. When in fact they are more accurately called small loan sky trailcash providers.
The most obvious point of differentiation would be the loan threshold. If the loan exceeds $500, then the provider is a small loans entity. If the loan does not exceed $500, then the entity is a payday lender.
Another less obvious method would be to check the license to do business. The principal entity that governs Alaska payday loans and regulates the same is the Department of Commerce, Community, and Economic Development, Division of Banking and Securities. Their website has a link that will show you the list of licensed payday lenders in Alaska.
We search with more than a dozen payday lenders that operate in 50 states. Each lender has different lending policies. This means consumers have a higher chance of getting approved for Alaska payday loans that are best suited to their personal and financial situation.
To clarify, most lenders will look at your credit history. If you have bad credit scores and red flags on your report, then the chances of loan approval and/or the best interest rates goes out the window. lenders does not base loan approval solely on credit history. They realize that some borrowers have bad credit. As such other, factors such as amount of income, type of employment, and regular status as an employee are given more importance.
In most cases, a credit inquiry will be conducted. This takes the place of faxed or emailed documents (i.e. W2’s, pay slips, bank statements.) This makes the process faster. The inquiry is only to get information as to your employment and to verify the identity of the borrower.
Traditional forms of payday lending entails: going to a physical location; presenting your W2, pay slip, bank statements, etc.; waiting in line; filling out an application form; and returning the next day to get your loan amount.
Curiously enough, there is a law that allows banks and other lenders to charge small loans with 5% higher than the 12th Federal Reserve District Rate. Also, some borrowers are forced or cajoled into borrowing bigger loan amounts. If the borrower insists on a smaller loan, then the bank simply denies the application, stating they have no loan option to offer in that amount. The problem is, the excess amount ends up being spent by the borrower on unnecessary purchases.
Some people borrow smaller amounts from separate lenders or separate loan accounts. Be careful of this practice. If you can, apply for one loan only. This way your lender will only charge you once and not twice. This is not only in terms of interest rates but also in terms of closing costs.
Some payday loans in Alaska may have high interest rates. But in some cases, this is more acceptable than not having the cash on hand. For instance, your salary got delayed for a couple of days and you need to pay your utilities. If you do not pay your bills, then your utilities will be cut. Ask yourself, how much would you have to spend to have your utilities reconnected again? Chances are the interest on a payday loan is lower. This is not even considering the hassle it takes to apply for reconnection.
Alaska Division of Banking and Securities
P.O. Box 110807
Juneau, AK 99811
Phone: (888) 925-2521
Fax: (907) 465-2549