Payday Loans Can Lead to Lasting Debt

Payday Loans Can Lead to Lasting Debt

Payday loans issued by cash advance agencies are small loans taken out against one's paycheck to tide consumers over until their next payday. Payday loan agencies offer a quick solution for cash-strapped people that often lead, however, to long-term debt at outrageous interest rates. According to the Center for Responsible Lending (CRL), the average consumer who borrows money on a payday loan winds up in more than half a year of debt with an average of nine transactions with these companies at an interest rate of more than 400 percent. Twelve million people every year find themselves in debt to payday loans. Typical loan terms for a payday loan require full payment in a matter of weeks, along with the steep interest. These types of loans generate more loans and more debt, which end up in a dwindling spiral of financial loss for the borrower. While the payday loan industry promotes itself as an agency to be used infrequently for emergencies, in actuality the industry's profitability relies on its repeat customers who are often trapped in an endless cycle of debt.

A few states have enacted restrictions on payday loans, such as Oregon, Montana, and Arizona. Illinois has no such reforms. 15 states have made triple-digit interest illegal but Congress has done nothing to protect consumers from the predatory lending practices of the payday loan industry. CRL along with other social agencies such as AARP, the National Consumer Law Center, Consumer Federation of America, and others have urged the FDIC and the Office of the Comptroller of the Currency to make restrictions against payday loans by banks that they oversee.

Bankruptcy and Debt Relief in Chicago, Illinois

Payday loan debt is one type of unsecured debt which can eventually lead to financial insolvency. Those who seek payday loans may already be in a situation of overwhelming debt which could be handled in other, more proactive ways. Getting the financial information you need for debt relief is a vital first step if you are facing a situation of overwhelming debt. Attorney Joseph P. Doyle offers comprehensive legal advice and representation in Chapter 7 and Chapter 13 personal bankruptcy, alternatives to bankruptcy, and other debt relief options for individuals in and around the greater Chicago area.

If you are unable to pay your bills, you should not hesitate to learn the available options you have for handling the situation. Giving the honest debtor a fresh start is the stated goal of the federal bankruptcy laws. You can learn more about how to properly handle your debt by contacting Mr. Doyle's firm to arrange for a free, initial consultation. It may be the wisest step you ever take in handling your financial crisis.