Whilst federal laws apply to all of the states that make up the United States, each state is also classed as a sovereign entity and in many cases, they have the power to pass their own laws and legislation and regulate them how their governors see fit. This is the case when it comes to loan legislation, there is no legislation in place that applies to all states, the loan legislation between states is vastly different. There are also many different types of loans that each state officials will have to create legislation around from title loans to payday loans. A lot of work goes into creating and regulating legislation as it has to be revisited often as the economy is always changing and parts of loan legislation i.e interest rates are a reflection of the position of the economy. Some states have passed much fairer loan legislation than others, this is bound to be the case when those in charge of each state have different views. We’ve found the states with the fairest loan legislation so if you ever need to take out a loan you’ll know where is best to do it.
Texas as a state tries to regulate the actions of its citizens as little as possible as the governors and majority of the people there are strongly capitalist and believe that you should have the freedom to make your own choices without state interference. Because of this, it has loan legislation that suits the people there, there are title loans available in Texas as this is a popular type of loan for lenders as they have an asset of the borrower for their protection. But, the most popular type of loan in Texas is payday loans, thanks to their relaxed legislation the payday loan industry is thriving in Texas with just over 20% of all of the payday loans being taken out in America being taken out here.
Back in 2020 Nebraska made some changes to its loan legislation making it much fairer. The officials in Nebraska put a vote out to the citizens there questioning if they want to cap payday loans at 36%. The Secretary of State announced the results of the vote and revealed that the support for this cap was overwhelming with a massive 83% of voters in support of the ballot. Prior to this vote, the average interest rate for payday loans was at 404%, and they had some of the toughest fees also placed on loans, for smaller loans there could be a $15 charge for $100 loan on top of interest. This is what helped make the vote possible and those living in Nebraska see this much fairer legislation as a big win.
Connecticut has some of the strictest loan legislation with lots of regulations involved. They never legalized payday loans and lenders here have strict requirements. This is the opposite of Texas, Texas has little regulation and massive industry, whereas Connecticut has lots of regulation, making lending very unprofitable. Whilst there are fewer lenders in Connecticut thanks to the regulation those who do manage to obtain a loan in Connecticut do so on favorable terms as all lenders require a license from the Banking Department of Connecticut which allows for additional protection of lenders and they have introduced on of the lowest caps on small loans at only 12% APR. These laws are in place for the protection of the citizens but also cause potential lenders to take their business elsewhere.