Escape the Painful Cycle of Payday Loans
Day after day we head off to work, do our jobs, and pay our bills, but sometimes staying afloat leads us to make decisions we later regret. Like taking out a payday loan. DebtBlue can help if you need payday loan debt settlement.
We have all been in a situation where the budget gets blown away by some unforeseen event.
Car trouble, medical bills, even an honest mistake by your employer. All it takes is one unexpected expense, or a slight dip in income to create a financial crisis that leaves us scrambling to make ends meet. Late fees, banking surcharges, and the threat of a hit on our credit score leaves us with tough decisions to make.
Amidst such gloom and worry, the lure of a payday loan can gleam bright as spring sunshine, but this ray of hope is often fleeting because many payday lenders are predatory and deceitful. Behind these so-called easy term loans are a truth many of us fail to see until we are caught in a bad cycle of debt.
Here are a few facts about payday loans …
- Payday Loans are billed as short term loans, generally between $50 and $1000.
- In theory, payday loans are meant to bridge a gap until the borrower’s next paycheck.
- Sold as short, two weeks or fewer loans, they are difficult to pay off because of large balloon payments.
The terms on these loans are brutal on consumers, especially those of us already on tight budgets.
More often than not the short term loan is extended via a second loan. And then a third, fourth, etc. Often times it is all we can do to pay the interest, and a small portion of the original principle. This trend leaves us with a debt that subsides ever-so-slowly, leaving us struggling week after week.
On average, borrowers go through eight to thirteen loan cycles before repaying their initial payday loan.
A typical payday loan of $300 costs slightly more $800 to pay back, resulting in $500 of fees that our budget could have used to catch up elsewhere.
Interest rates for such loans vary by state, but typically come in around 400% or more.
This is 13X higher than the average APR for credit cards. This rate also far exceeds the cost of late fees for rent, mortgage, car payments and other credible creditors. So while late payments are never an ideal situation for long-term financial health due to the adverse effect on credit score, we are usually better off paying a few late fees here and there rather than trapping ourselves in a damaging cycle of a bad payday loan.
A few more facts about payday loans …
- According to PEW, the average loans cycle drags on for 5 months costing the borrower $520 in fees on an original loan of $375.
- Payday lenders demand access to your bank accounts assuring payment to them before all other creditors. This can leaving us no choice but to re-up the loan, for essentials like groceries, gas, and utilities.
- Eighteen States as well as the District of Columbia have recognized the predatory nature of payday loans and have legislation in place to prohibit high cost payday loans.
Unexpected debt and a strained budget is something we all face. If you are caught in the payday loan cycle, rest assured real solutions are available.
A payday loan settlement can be negotiated. The DebtBlue team specializes in debt settlement. Our knowledge of the applicable laws and guidelines helps put the power back in your hands as we negotiate a plan and settlement to reduce your debt without the occurrence of additional fees or interest.
Regain your financial freedom and contact DebtBlue today for a no-obligation consultation.