Illinois has become the latest state to pass a law capping interest on payday loans.

Beginning in March, 2011, loans with terms of six months or less may not be priced at rates of greater than $15.50 per $100 borrowed every two weeks. The new law also requires that a payday loan borrower must be completely out of payday loan debt after 180 days paying off the loan and prohibits balloon payments.

Lenders would also have to limit loan repayments to no more than 25% of a borrowers gross monthly income and the new law forbids adding post-default interest, fees for court costs and attorney's fees to the costs of a payday loan.

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