Payday Loan Scams Are Putting Chicago Workers in Debt
Would you give up your paycheck to get paid earlier? Doesn't make sense, does it?
But millions of Americans do just that by taking out payday loans.
When you're strapped for cash and payday is days away, a short-term loan can look like a quick solution. Get the money now, pay for it later. But the problem is short-term loans mean high-interest, and interest rates don't get much higher than at payday loan centers, where paying $100 for borrowing $300 is not uncommon - and annual interest rates can exceed 500%. Makes your credit card APR look cheap, huh?
If you're not already in debt, relying on payday loans is a sure way to get there. Here's why.
When you sign up for a payday loan, you leave a check or electronic bank account authorization with a lender. Once payday comes, you can either pay back the full amount of the loan, plus a fee (i.e. interest) or the lender will take it out for you via your check or bank information. If you can't afford to pay back the loan, you can roll it over. That means you can keep your money this week, but you're now eligible for the original loan plus twice the fees. Heck, you may even have to take out a new loan to cover the first one.
Most folks know payday loans are risky, but they have high hopes they can pay them back. Unfortunately, it's impossible to predict the future. Circumstances could arise to make money even tighter than before you borrowed against your paycheck. Even if nothing drastic happens, your paycheck may not cover the loan and fees once you've paid the bills, bought the groceries and filled up your tank with gas. Most borrowers eventually come up short, which means the loan must be renewed. That leads to more fees, and more trouble paying - it's a trap that can spiral out of control quickly.
If you need quick cash in a pinch, check out our video learning center for some alternatives to payday loans. Meanwhile, consider getting to the heart of the problem - the fact that your income is not in line with your spending. One of the fastest ways to bring home some extra bacon is to reduce your expenses - and you can do that by lowering debt. Less debt means less interest, smaller bills and more money in your pocket. Sign up for a free personal debt analysis with a Chicago bankruptcy attorney to find out if filing for bankruptcy can put you on the path to financial freedom - and out of the grips of predatory lenders.