Payday loans a bad deal, advise Chicago bankruptcy attorneys
Whoever said that patience is a virtue might have been talking about payday loans.
You've probably noticed payday loan centers in your neighborhood - maybe you've even used them yourself. An online search for payday loans in Chicago nets nearly 300 results. And with so many folks living paycheck to paycheck, it's no wonder. But, as with tax refund loans, while there's no faster way to get your earnings, there's also no faster way to lose them.
It's why my first payday loan was also my last. My coworker at the time wanted to go out to a club one night, but I said I had to wait until we got paid. No worries, she said, we'd just go get a payday advance. She took me to a center, where the cashier counted out three crisp $100 bills - for a $50 fee. Ouch! I decided then and there I'd rather wait for a few days and hold onto my entire paycheck.
My coworker wasn't so patient.
When you take out a payday loan, you typically write a check for the amount plus the fee and leave it with the center. When your employer pays you, you authorize the lender to cash the check; otherwise, you have the option to "roll over" the loan every two weeks for a fee. My friend was so strapped for cash that she paid $50 every two weeks to keep putting off her loan. It took her a year - and $1,200 - to pay off the $300 she took out with me. That's like a 400% APR! And it wasn't her first loan - the more she borrowed, the more she had to keep borrowing because the interest from the advances ate up her income.
If you never have enough to pay the bills, maybe it's time you took a look at how much interest is eating into your paycheck. How much goes to credit card companies and lenders? You might find you'd make more money by paying off your debts than if your boss decided to give you a raise.
So how do you go about reclaiming your full paychecks? You need to break the cycle of spending more than you can afford. If you can reduce expenditures to the amount of your paycheck or less - and wait until you actually receive the check to start spending - you will eventually be able to pay down debts and say so long to interest. Of course, budgeting when you're flat broke is no easy feat. That's why bankruptcy is the safest way to make a fresh start. When you file, you only have to pay back the amount you can actually afford - not to mention you get legal protection while you do it. That means no more taking out an advance to pay the bills, then taking out another advance to pay for the first advance. To find out if a bankruptcy plan is your ticket to debt freedom, contact our attorneys for a free one-on-one debt analysis. Catching up will take a little patience in the present, but it will pay off big time in the future.