Payday loans are short-term, high-interest loans given as an advance against your next paycheck. Usually the lender will require that the customer leave a predated personal check which can be cashed on the date of the customer’s next payday. Lenders charge $15 to over $20 per $100 borrowed for a two-week loan, which translates into an interest rate of 520 percent per year or more.
Customers also have the option to pay only the interest on the loan, and to carry the principal to the next paycheck. The result is predictable. If someone needs to borrow $500.00 today for an unexpected expense, or to pay their bills, it is unlikely that they will have $600.00 to repay the debt in two weeks. Many customers don’t have the money to pay the entire principal on time, so they start a cycle of paying the interest only each payday, never making any gain on the principal, and in this way they stay in debt to these lenders for years.
In my bankruptcy practice, I see these types of loans regularly. My clients often follow the same progression of indebtedness. First, they get behind on their regular bills, mortgage, or car payments. Next, they use credit cards to make up their financial shortfall. When they have reached the limit on their credit cards they sometimes turn to payday loans. If you see yourself heading down that path, contact me to discuss your financial situation. My clients can often resolve their financial troubles simply by changing their strategy for repaying their debt or by making some minor changes to their budget. If bankruptcy is needed, I can help my clients file and advise them on how to protect their assets.
The attorneys at The Wright Firm offer free initial consultations to clients in need of help with their financial situation. Call Nathan Graham, a bankruptcy attorney at The Wright Firm, at 469-635-6000 or visit the firm’s website at www.thewrightlawyers.com for more information.
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