High Interest Loan Payments - How should they be applied?
Yes, I know payday loans and other high interest rate loans are awful. I unfortunately was stuck between a rock and a hard place (lost work hours, middle of a divorce, my house burnt down in August) so I needed the funds. My question is: are there any rules with how payments are divided (what goes to interest VS what goes to principal)? I knew the interest rate was awful, but I found out recently that only pennies (yes, PENNIES) are being applied to the principal while the other $99 is all going to interest (biweekly)
I knew it was going to be bad, but with $99 and some change being taken out bi-weekly, only putting pennies towards the principal and the rest towards interest seems like it should be borderline unlawful.
Does anyone know if there are rules/laws prohibiting actions like this?
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Certain types of loans, are dictated by state law, and others by Federal.
Payday loans are under your state jurisdiction, so they will apply based on state law. In Georgia for example, there is no limit to the interest rate of a loan. I have seen offers in excess of 600% interest.
The terms of your loan will be the factor here. if it is simple interest or amortized will play a big role in how the interest is applied. I would need more information to break that down.
My best advice is to try and take a personal loan from a bank to refinance this disaster of a loan.
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