Financial Experts Warn that Payday Loans Are Not a Good Idea
Des Moines, IA (Law Firm Newswire) July 2, 2013 – While many people are tempted to get a pay day loan to help them through a tough cash flow period, financial experts warn this is not a smart fiscal move.
The debt load faced by the majority of U.S. citizens is staggering. Most debt currently overwhelming these households originates from debts relating to home mortgages, credit card charges, large medical bills and other personal liabilities. Because so many people find they need more cash on hand, they resort to applying for a payday loan. Most major cities and even some smaller towns now have places which offer payday loans.
Payday loans are often referred to as “short-term loans” or “cash advance loans,” with the term of the loan generally running approximately three weeks. This short-term loan allows someone to meet their expenses until their next paycheck. When they fill out the contract for the loan, the individual is usually also required to provide employment and income information and hand over a post-dated check. The post-dated check is made out to the lender for the amount of the loan, plus the loaner’s fees. While this transaction is often done in person, it is becoming more common to apply for payday loans online.
No two states have the same laws relating to payday loans; when an individual based in Iowa has an issue with one, they are advised to discuss their concerns with a qualified Iowa bankruptcy lawyer. Payday loans are overwhelmingly considered a bad choice for consumers, say financial experts; as soon as a payday loan is accepted, it can only exacerbate any debt issues due to the loan’s high fees and outrageous interest rates.
As an example: some lenders charge $15 or more for every $100 the lender borrows. If someone signs up for $2,000, just the fees may be an additional $300. That three hundred dollars is the cost of a two- to three-week, short-term loan. That does not even take into consideration the interest rates on the money that has been borrowed. The day the individual gets paid, they are expected to return the loan amount, as well as pay the fee. If there is no payment forthcoming, the payday loan company will cash the post-dated check they were given as part of the contract. If the individual places a stop payment on the post-dated check, or if the check bounces, the company will start charging interest, and may even send the account to collections.
No one wants to deal with collection agencies, face harassing phone calls, letters, or find out that they have been sued and there is a judgment against them. Though lenders are not allowed to call a person at work, their neighbors or their family members, they may threaten a debtor with jail time. For individuals who are concerned about how to stop payday loan collection activity, they are advised to contact an Iowa bankruptcy lawyer and find out what options they may wish to consider.
Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact an Iowa bankruptcy attorney, Iowa bankruptcy lawyer, or set up an appointment, visit http://www.iowachapter7.com or call 1.877.888.1766.
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