Many services are offered as quick fixes for those who are experiencing financial hardships, especially those who are trying to avoid filing for bankruptcy. One such service is the payday loan. You may have heard about these loans. Perhaps you considered getting quick cash to pay your bills or took advantage of a payday loan in the past. You and other Florida residents should understand how payday loans work, as well as the high risks associated with them.
The National Consumer Law Center cautions against applying for payday loans, especially if you are suffering financially. Unfortunately, these quick, easy-to-obtain loans can be tempting for those in dire financial straits. In fact, payday lenders often target those who are desperate for money.
There are numerous problems with payday loans that can put you in a worse financial situation. These include the following:
- High interest rates
- Access to the customer’s bank account
- Requirement to repay the loan in full by the next payday
How is this a problem if my loan is repaid next payday, you may wonder? Imagine that you borrow $300 to help you cover rent. After your payday arrives, you are automatically out $300 when the lender takes the money out of your bank account, in addition to the interest charge. You may need that money for other expenses. This is how many consumers fall into the payday loan trap – they must continue borrowing to pay their bills and fall deeper into financial trouble with the high interest charges.
Other options exist to help you recover from financial struggles, including credit counseling and bankruptcy. This information is not meant to replace the advice of a lawyer.