Every year, the 12 million Americans who take out payday loans end up paying close to nine billion dollars in loan fees. Because these loans are so popular, we explain what you need to know about them so that you can decide if these types of loans are right for you.
Payday loans target people who are in need of money fast but don’t have the credit history or collateral that is required to take out a more traditional loan. Typically, the only requirements a person needs to qualify for a payday loan are proof of employment and a bank account. These loans have very high interest rates and are often given to those who feel desperate and out of options.
Although payday loans are supposed to be a quick fix, the average borrower is in debt for at least 5 months. The average loan fee is $55 every other week and 80% of all payday loans are taken out two weeks after another one was paid in full.
What Will Happen If I Don’t Pay My Loan?
Just like other loans, defaulting on your payments can result in increased fees, penalties, and even legal action. Most payday loans use automatic debit payments that take funds directly out of a bank or prepaid account, which can sometimes cause borrowers to incur overdraft fees. In addition to these expenses, you will also get a continuous flow of calls and threats from debt collectors.
Can I Get Out of Payday Loan Debt?
Depending on where you live, there might be laws in place that can help you get out of debt. Many states are currently working to change how payday loans are administered to make it simpler for customers to pay their loans back and get out of the cycle of borrowing. Some states also require lenders to offer an Extended Payment Plan (EPP), which stops additional fees and interest from being tacked on to the loan.
Credit counseling is another option that can help you get out of debt. Payday loans present unique challenges that you will need to overcome, and a credit counseling agency can do the following things for you:
- Restructure the Payments
- Negotiate a Settlement
- Help You Budget
While most people only use this as a last resort, bankruptcy is another option that can get you out of your payday loan debt. In general, payday loans are treated just like any other unsecured loan, which means it can be discharged in bankruptcy. You should consult with an experienced attorney to determine the best option for your situation.
Our attorneys can help if you are drowning in payday loan debt. Call (312) 313-1613, or contact our Chicago debt collections attorneys to set up a free case evaluation today.