Payday loans come with big promises. They claim to help you out of a tight spot when you’re short on funds. You can borrow a little bit of money just to get you through to your next paycheck. In theory, it’s just like borrowing money from a friend, but without the awkwardness that can cause problems in your friendship. Plus, you have to pay back the money with interest.
Sounds pretty good, right? For many, it does. Then they are surprised when they find that the payday loan actually causes them more problems. In fact, it can worsen their financial problems or set off a cascade of problems that can ultimately lead to bankruptcy in Gilbert. Here’s what you need o know:
How Payday Loans Work
Payday loans are advertised as an advance on your next paycheck. But really, they are personal loans based on your income. You show a pay stub (or a certain number of pay stubs) to prove that you have a steady income, as well as to prove how much money you make. You either request the amount you want, or the lender offers you an amount based on your income. Many lenders will give you the full amount of your expected paycheck.
Many times, the lender asks for your bank account information to deposit the loan funds directly into your account. You will owe the money you borrow on your next pay date, including interest and fees. Some lenders take the money directly from your bank account, and others ask you to write a post-dated check for the amount.
How Payday Loans Lead to Debt
Of course, you would expect any loan to come with interest. But what you might not expect is just how much interest you will be charged for a payday loan. Lenders charge as much as 400 percent interest. These are short-term loans, so they make their money on the high interest rates and fees.
Those kind of fees just make more problems for you. If you have the money in your account to cover the fees, your account will be drained once the loan becomes due. You won’t have the money that you need to cover your expenses, which means that you’ll have to continue borrowing to stay afloat. You’ll just be kicking the can down the road.
Many people don’t have the money available to cover the high interest rates when the loan becomes due. They end up with overdraft fees from their bank, or they have to extend the loan, which results in interest fees piling up over time. You may feel like you will never pay off the loan.
Debt Relief through Bankruptcy
You may have to take on other lines of credit to pay off your payday loan or to pay off other expenses while you are paying off your loan. Eventually, you may become overwhelmed by debt. You may have to sell things to pay off debts, or your creditors may start seizing items to satisfy your debts.
Filing for bankruptcy can provide fast debt relief. If you file for Gilbert Chapter 7 bankruptcy, you can have your unsecured debts eliminated, such as credit cards and payday loans. If you file for Gilbert Chapter 13 bankruptcy, you can have your debts restructured into a more affordable payment plan that is designed around your income and your personal expenses.
The best thing you can do is talk to an experienced Gilbert bankruptcy attorney to review your personal financial details and to determine the best course of action. Your attorney can help you understand if Chapter 7 or Chapter 13 would be best for you, or if you need to consider another path to debt relief.
Contact Gilbert Bankruptcy Lawyers to learn more about bankruptcy and to find out if it’s right for you. Our bankruptcy law office handles personal and business bankruptcy filings, and we can help you get the debt relief you need fast. Your Gilbert bankruptcy lawyer may be able to help you eliminate your debt, put a stop to harassing creditor phone calls, and stop wage garnishments and other debt collection action. Call our bankruptcy law office today to speak to a bankruptcy attorney about your situation.
Gilbert Bankruptcy Lawyers