We’ve all had those days when payday can’t come soon enough. Things seem to be piling up and the pressure to pay bills becomes more and more powerful. Sometimes you may feel overwhelmed and looking for a way out of the vice grips, but you have to make sure you know the level of risk you may be taking by getting a payday loan.
What is a Payday Loan?
- A payday loan is a short term loan for a smaller amount; usually less than $1000.
- Repayment of the loan is typically due in full on the next payday; hence the name.
- The dates of your payday must be disclosed to the lender so they know when to get their money back.
- Lenders are allowed to directly draft the repayment amount out of your account
- High fees and extremely high interest are added to the loan amount
The Problem with Payday Loans
As mentioned above, there are fees added on to the loan, which are usually as high as $30 for every $100 loaned. The typical annual percentage rate on a credit card is between 12-30 percent. The APR equivalent on a payday loan can be upwards of 400 percent. While this is dangerous enough on its own, even worse is the usually two week repayment deadline.
More often than not, someone needing a payday loan to help them make it through the week will likely not be in any better position to make a repayment in two weeks. Unfortunately, many opt to extend their payday loans to the next week, and the week after, and the week after, and so on. They’re never really able to get ahead and all the while adding more and more fees and interest. Even worse (yes, it gets worse) are online payday sites. Many online payday lenders are scams, requiring an upfront fee and then disappearing completely.
Payday loans are banned in many states as they have been labelled predatory. Many of these lenders just look to take advantage of people in their weaker moments. For anyone who is relying on these payday loans to keep going or someone that cannot get out of the continuous rollover, bankruptcy may be the best option. Payday loans tend to snowball and can overwhelm any debtor. Consult a bankruptcy attorney so they can help you get back in front.
Garland & Mason, L.L.C. – New Jersey bankruptcy lawyers