What’s the harm in taking out a payday loan? You’re simply borrowing $100 to hold you over until your next payday, right? According to the Pew Charitable Trusts, 12 million Americans take out a payday loan every year, but despite how prevalent they are, they are a trap, with unimaginably high interest rates, sometimes several hundred percent.
Think about that. A payday loan often costs $15 to $30 for every $100 you take out. That comes out to an APR of at least 360%. That’s more than ten times the interest rates on credit cards, which are high enough themselves.
Sometimes it’s even higher. As Kyle Trattner writes for MoneyWise, Scott Tucker, a payday loan kingpin who’s currently behind bars, “offered predatory payday loans that were intentionally confusing and featured high administrative fees and deceptive customer service practices. Federal prosecutors said the interest rates were as high as 1,000%.”
The Ripple Effect of Payday Loans
With such high interest rates, it’s no surprise that borrowers have to take out additional loans to pay off their existing ones. Of course, that costs a new fee, in addition to the original.
The lenders know this In fact, it’s exactly what they want. Lenders make more than 70% of their money from repeat borrowers who take out more than ten loans a year and pay 391% in interest and fees. As a Chapter 10 bankruptcy lawyer Memphis trusts, I meet many people who are unable to break the cycle.
There Are Not Real Alternatives to Payday Loans
Credit cards, personal loans, and other quick solutions to the slippery slope of payday loans are merely putting a band-aid over a bigger problem. If you feel pressured to take out payday loans, you need a bigger-picture, lasting solution, and I can help you.
In contrast to payday loans, bankruptcy can bring a financial freedom that lasts. We’ve built a solid reputation as a bankruptcy law firm Memphis, TN clients recommend. Whether you want to get rid of dischargeable debt, like credit card and medical debt, in a Chapter 7, or consolidate your mortgage and car payments into an affordable amount in a Chapter 13, I can help.