When suffering financial difficulty, many consumer contemplating bankruptcy are tempted to keep their heads above water by taking out payday loans. Before taking out a loan, you should consider the advantages and disadvantages.
Payday lenders receive their fair share of criticism over the high fees they charge consumers, but continue to flourish across the country. To use an example, in Utah, the first lender appeared in the state in 1984. In 2005, there were 381. So many payday lenders sprung up that one city in Utah, Ogden, actually passed legislation limiting the number of lenders to fifteen.
The service that these lenders offer is fairly straightforward. Borrowers receive cash today in exchange for a post-dated check written for a higher amount. The lender holds the check until after your next pay day. If you are unable to cover the check when payday arrives, the lender tacks on more fees and rolls them over to the next payday.
Before taking out a payday loan, it is important to make sure that you are informed and that borrowing makes sense in your financial circumstances. In order to avoid lending fraud, you should first make sure that your lender holds a valid registration in your state. You should also be realistic about the risks of borrowing what amounts to very high-interest rate loans. These lenders are very aggressive when it comes to repayments and you should make sure that you can afford the loan before taking it out. It is also very important to obtain a written contract from the lender and read the contract before signing; the number-one complaint among payday borrowers is that they did not understand the terms of their loan. Make sure you pay very close attention to interest rates and fees. Most states have laws requiring payday lenders to disclose a complete schedule of any interest or fees they will charge. Rates and fees can be shockingly high. Make sure you carefully review the schedule so that you do not take out a loan you will be unable to promptly repay.
If you are contemplating a payday loan, proceed with caution. If you have already taken out payday loans and are unable to repay, it is time to speak with an experienced bankruptcy attorney in your state. Most bankruptcy attorneys will give a free initial consultation and can offer valuable advice on bankruptcy or non-bankruptcy options available to you.
About the Author:
Brandon Moreno is a founder of the Utah Bankruptcy Hotline, which connects Utah consumers that are suffering from financial difficulty with experienced Utah bankruptcy lawyers.