Scenario One: You are short of cash, so you post-date a check for $375.00 and present it to a Payday Loan Company. They agree to give you the
cash, with a promise from you to pay it back, in full, next week. The next week, IF you have money, you pay them $375.00 + 52.00 = $427.00. You have just paid them 399% interest.
Now if this is a one time deal, and it got you out of a jam, and you are now completely paid off, congratulations! Consider yourself lucky and don’t repeat.
However, many times, when you come back the next week, you are still short of cash, so only make a payment. Then you repeat this procedure until it is paid with 300% interest every single week.
To make matters even worse, you may take out a second loan and some people have even taken out multiple loans at different locations.
This is a financial nightmare; a disaster of epic proportions that indicates your finances are way out of whack with little hope for recovery. Bankruptcy may be the only alternative, coupled with pledges to NEVER do it again.
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Scenario Two: You find a Payday loan lenders online. A company that is as good as it gets, dealing with these types of high interest loans, is Plain Green Loans.
Their website is well designed, easy to navigate, understandable and no hidden costs. You can apply for a loan based on any income you have that is steady. Social Security, Disability, Paychecks, etc.
The first loan is usually between $300.00 and $500.00. You pick a schedule of how many months you can pay it back, and MUST set up a direct pay option. Then, like clockwork, they take their payment until it is paid, again at 300% interest rates.
This is an option ONLY for those who can not obtain a loan by any other means. Used once; no harm done but a lot of money spent. Used over three times a year, and you are again, playing with financial dynamite.
Pay Day loans are the most expensive loans you can obtain anywhere. And as we established before 12 Month Loans and Payday Loans are basically the same thing.
However, to be perfectly fair, the 300% interest is based on a full 12 months of the year; and other financial mistakes are just as bad. Using $100.00 as the balance in all of these examples: a bounced check with a bank charge of $54.00 is 1409%; a credit card with $37.00 late fee is 965% and even a utility bill with a service charge of $46.00 is 1203% based on a yearly percentage. None of them good, and to be avoided if possible.
Here are some payday loan alternatives to break the chain of needing them:
Borrow from friends or family to pay off
Try Credit Union signature loans
Raise money by selling things or pawning valuables
Take on extra jobs to earn more income
Cut expenses; try food banks and social services
Be creative and look for options
Once the cycle starts, it is hard to break; overdraft fees sometimes come into play making matters worse.
Seeking credit counseling may help, but you may be so upside down in debt to assets that they can not even help. Somehow, some way, you must deal with the problem and then stay away from payday loans forever.
Talking to a bankruptcy attorney may be the only alternative to ending the deadly cycle, and if you ask them, they will tell you that the average client who files bankruptcy lists at least THREE payday loans on the debts that want relief from, with averages of $1,000 per loan.
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