At least partially due to the recession, Payday loan stores have become more prevalent. You’ll find them in every major city, especially in areas of lower income populations. Recently, while driving along a major road in the Milwaukee area, there was a billboard for a local ‘payday loan’ establishment. The observation prompted the idea to discuss these types of cash advance loans.
Convenient and necessary Financial Services: Payday loans represent an important source of credit for millions of Americans who live from paycheck to paycheck. Many of these people don’t have access to credit cards, or have a financial institution to deposit funds. Payday stores will cash a paycheck or provide drafts or money orders for a small fee. There is nothing wrong with making a profit, and these services at first may seem harmless. The problem is that they often promote and lead to other services that are more predatory in nature, and contribute to the cycle of debt.
Cash-in-advance: Trapping people into cycle of debt: A payday loan or “check loan,” is a short-term loan that is typically due back on your next payday. Fees for the loan are based upon the amount borrowed, and how quickly the balance is paid. In advance, you must provide the store access to your checking account or write a check for the full balance. If the amount due is paid in full, and on time, the borrowers is down by the amount of interest charges. If it’s not paid, charges continue to build each day. It’s not uncommon for someone to get so caught up in the cycle that they cannot repay what is due.
High interest payday and car title loans: The cost of the pre-payday loan includes finance charges that may range up to $30 for every $100 borrowed. Consider this, a two-week payday loan with a lower-end $15 finance charge on $100 borrowed, equates to an APR of nearly 400%. ( APR’s on credit cards can range from about 10%-30%.) Car title loans are modeled after payday loan and are just as dangerous.
Payday loans and bankruptcy: Washington should not dictate consumer financial decisions but there are some ‘common sense’ protections that still need to be established. Congress is currently circulating ideas to ensure that consumers have fair access to credit that doesn’t harm them in the long run. If you find yourself stuck in cycle of payday loan debt, find some relief in the knowledge that they are dischargeable in bankruptcy.Contact a local firm, experienced in WI bankruptcy laws and knowledgeable regarding payday loans.