Inflation is on the rise, wages are stagnant and people are having a hard time making ends meet – and that’s just when you’re considering the regular month’s expenses. Even a small unexpected repair bill or a minor financial emergency can leave many households struggling to cope.
When people lack savings, have already maxed out their credit cards and don’t have any other resources to borrow from, they often turn to payday loans for short-term solutions. They’re easy to obtain and often appeal to people who are already burdened by bad credit.
However, payday loans are so problematic that some states have even made them illegal. Alabama has not, but you want to consider your situation very carefully before you go that route.
The expectations sound reasonable, but they’re really not
Obtaining a payday loan when you’re in a crisis can give you a huge sense of relief, but that relief can quickly fade when you realize that you now owe that loan back on your next payday, along with up to $17.50 in fees per hundred that you borrowed.
In other words, if you borrowed $300 to fix your car, you could owe $352.50 back to the lender on payday. If you don’t have a spare $300 right now, the odds are high that you won’t have a spare $300 plus interest of up to 456% on your next payday, either. Borrowing the $300 now can ultimately just delay the financial crisis.
Often, borrowers end up “rolling over” their loans by just paying the interest, usually hoping that they will find a way to pay off the principal by their next pay. When someone is already in precarious financial straits, the bi-weekly fees on those loans can be an additional burden that traps them in a debt cycle. Sometimes, even if they’re not supposed to do it, people will even take out another payday loan with a second lender to cover the first.
When your debt has gotten out of control, you do have options available. Bankruptcy can help many people regain their financial footing. We cannot stress enough how financially devastating payday loans can be. We have represented many clients who experienced the debt spiral due almost exclusively to payday loans.