It can happen in an instant; one moment everything is going great and the next your car needs an expensive repair. You know you need that car to get to your job, the kids to school and your spouse to important medical appointments, but how in the world are you going to come up with that much money quickly? For some people, payday loan stores provide a quick and easy way to take care of emergency needs, and there is nothing to be ashamed of if you need to use this resource. The larger issue, however, is the lack of budgeting and planning that precluded you having emergency funds in the first place. When this same lack of planning causes your entire financial situation to go into a meltdown that simple payday loan might come back to haunt you. Read on to learn more about just how much trouble you could get in with payday loan stores:
How Payday Loans Work
All you need is proof of a job and you can be on your way with cash in hand in no time flat, or so the advertisements go. The way it works is pretty simple: you fill out a check that is linked to the bank account where your paycheck goes and you leave that check with the loan store. Once your next payday comes around, the check will be submitted to the bank for the repayment of the loan. Now, you may have heard various things about predating checks, but rest assured that it is perfectly legal to do so as long as you have every intention of having the money in the bank when the date of the check comes around.
The Fine Print
In some cases, you may be in such a hurry to get your cash and get your emergency taken care of that you don't care what you are signing. One of the papers in that stack was the interest rate disclosure information, which is required by law. You may have glanced at it and assumed that it was pretty reasonable, considering that you are only going to wait a few days to pay off the loan.
A typical loan may work like this: you take out $900.00 on September 1st at a 10% interest rate. The finance charge comes to $90.00, so $990.00 will be due on your next payday, say it's September 15th. If you are able to pay that loan back, you might consider it a fairly good deal. But what if you don't? Shockingly, the interest amounts to a rate of 260% over a year's time and you could end up paying $3240.00 to pay off the loan.
Bad Check Charges
If the interest rate on unpaid loans was not bad enough, the payday lender could threaten you with jail time for writing "bad checks" when you are unable to come with the loan money or if you refuse to roll the loan over to yet another payday. You may be told that charges have been filed against you and you may be sent to jail for writing worthless checks. Rest assured that this is just a scare tactic; you cannot be jailed for writing these types of checks. The payday loan store makes a ton of money off the interest rates you are paying when you take out another loan to cover your initial loan amount and the accrued interest. As long as you had no intent to defraud, you have nothing to fear.
If your financial situation has gotten worse, speak to a bankruptcy attorney right away.