Payday loans are an increasingly popular way for people to get money quick. But these loans can be quite risky because the debt can build up fast and become overwhelming.
If you feel trapped in a cycle of payday loan debt and believe you have no other options, do not despair. Here is some information about how payday loans work and what you can do if you need to get out from under your debt burden.
How payday loans work
Payday lenders issue short-term loans as a form of unsecured debt. The loans are usually relatively small amounts designed to get the borrower through until her or his next paycheck, when the assumption is that the borrower will pay back the loan. However, one of the hallmarks of payday loans is that they have exorbitantly high interest rates. This can make it difficult to pay back the full amount when it comes due, because in the meantime, the interest payment has built up and the borrower may not have the full amount available to pay back. A payday lender may then allow the borrower to “roll over” the debt, and this is what begins a vicious cycle. Although the Consumer Financial Protection Bureau recently set up new rules in an effort to better protect borrowers, the reality is that payday loans often put people in seriously deep debt that they feel helpless to climb out from under.
Is it possible to get out of the payday loan debt cycle?
Many think there are no options available once they feel trapped in a seemingly endless cycle of payday loan debt. However, the truth is that options do exist. You may have heard about Chapter 13 bankruptcy. Filing for Chapter 13 may be a way for you to get a fresh financial start and rid yourself of the payday loan debt cycle. Chapter 13 bankruptcy may also help you get out from under credit card and medical bill debt as well.
If you have overwhelming debt and do not know where to turn, you should consult with an attorney who has experience helping clients resolve their debt issues. A consultation can provide you with information to help you make informed choices about your next steps.