Monday, October 7, 2013
Breaking the Payday Loan Cycle For Good
When you got your first payday loan, it was for all the right reasons - you had an emergency and needed immediate financial assistance. You were sure, at the time, that you would have more than enough to cover it on your next pay day.
Once your next payday arrived, you were still barely making ends meet. Maybe it was due to leftover expenses from the original emergency or maybe you hadnt expected the finance charge of the first loan to be so high. Regardless of the reason, when offered an extension or even a second loan, the offer seemed too good to pass up.
Now, with two loans, your finance charges are totaling close to $200 every two weeks. And, even if you wanted to pay down the principle, you would not have the cash to do it.
How do you break the payday loan cycle once its started? If you are a loan customer and you find yourself overwhelmed, there are steps you can take to get your life back.
First, check your state laws. Find out what is legal and what is not legal in your state. While you are responsible for the principle amount you borrowed, you may be able to negotiate the finance charges or smaller payments over a longer period of time. Do not hesitate to communicate with the lender.
Second, whatever you do, do not take an additional loan. While an immediate influx of cash may seem helpful in the short term, it only makes things worse in the longer term.
Over the last several years, state Attorneys General have taken an aggressive stance against payday loan companies acting outside of the law. Several payday loan companies have been ordered to cease operations due to fraudulent lending practices-namely charging interest rates above and beyond a states legal limit. States are also cracking down on payday loan providers that lend to individuals carrying multiple loans (many states have a limit on the number of payday loans an individual can have at one time). Unfortunately, these laws havent stopped the most predatory of lenders.
