Payday loans are an enticing solution for people struggling to pay off debts. Unexpected medical bills and emergency car repairs can be difficult to pay off, and payday loans are readily available throughout the country to provide small loans. The way they work is that, for a fee, you can have a cash advance of typically $500 or less that you are expected to pay off on your next payday. You use your paycheck as collateral and the payday lender is given access to your bank account. They take the money that they lent you directly from your paycheck. These companies offer a seemingly easy solution for those who need quick cash in a tight spot, but the reality is that payday loans are designed to keep consumers in a never-ending cycle of debt.
A person who borrows $300 from a payday lender is expected to pay the full amount of the loan plus the price of the fee all at once in exactly two weeks. This can leave something like a bill of $345 to be paid at the end of that pay period, which amounts to a 400% APR, the average rate for these loans. For the vast majority of consumers who are taking out these loans, $345 can be too much to take out from just one paycheck. In fact, 4/5 borrowers require yet another payday loan to pay off the original loan, and thus the cycle begins.
CAN A PAYDAY LOAN HELP ME OUT OF DEBT?
Roughly 12 million consumers rely on payday loans a year to get them out of a jam. Many believe that a quick cash advance can put a stop to persistent debt collection calls for other debts they may owe. This may work well in the short-term, but long-term it can ruin your finances.
Payday loans are often referred to as “debt traps” because they feed on vulnerable consumers struggling to get by. The extremely high cost of borrowing the money and the short amount of time to repay the debt is fodder for repeat borrowers as these debts cannot be paid off little by little the way most other debts can. What ends up happening when a consumer pays these debts off is that the money goes toward paying off the interest from these loans, but the money hardly goes toward paying the debt itself.
In the end, consumers pay much more in interests than the original amount of money that was borrowed. In some parts of the country, interest rates can go as high as 800%. The average borrower takes nearly a year to pay off the original loan which is expected will be paid off in 2 weeks. There is limited regulation on the entire industry.
If you are receiving unwanted phone calls or text messages from collection agencies, avoid payday loans and speak with a lawyer instead. You may be able to recover $500 to $1500 per call or text. Under the Fair Debt Collection Practices Act (FDCPA), you may also recover damages if you are being harassed by debt collectors. With a knowledgeable team of Fort Lauderdale TCPA attorneys on your side, you could make a significant recovery and put an end to all the disruptions. Call The Law Offices of Jibrael S. Hindi at (844) JIBRAEL or contact us online for a free consultation.