Mississippi working to tackle payday loans and debt cycle

Local organizations in Mississippi have come together to respond to the devastating effects of payday loans. Although these loans are relatively easy to secure and seem like a quick fix for financial challenges, they can plunge Mississippians into a debt cycle that results in repossession and other consequences.

Identifying the negative consequences that flow from payday loans can help avoid serious financial problems. There are also tools available to respond to payday loan collection. Some Mississippi organizations and foundations are focusing on this initial effort: awareness. Groups like the Mississippi Center for Justice and the Knight Foundation want people to understand the loan's impacts on their finances and what happens in situations of missed payments.

A Mississippian who has a source of income and a checking account likely qualifies for a payday loan. Good credit is not a consideration. Once a person qualifies, he or she can usually take out payday loans in the amount of $200 to $300. What is not evident is that these loans are secured by property, like a car, and take nearly six months to pay back. People can end up losing their car and having to pay much more money than they ever borrowed. In fact, it is estimated that the payday lending business made over $300 million off Mississippians in 2010.

In addition to being aware of the details of payday loans before entering into such borrowing transactions, it is useful to identify the tools available after a loan has already been taken out. There are serious repercussions for missed payments on such loans, such as the threat of repossession. Fortunately, bankruptcy can offer some relief. Filing for bankruptcy can actually stop repossession. Bankruptcy also provides individuals the opportunity to gain control over their debts and work out ways to repay or discharge them.

Payday loans can spiral a Mississippian's financial life out of control. Still, with knowledge of the payday loan market and an understanding of legal tools like bankruptcy, it is possible to regain financial confidence and tackle problems caused by such loans.

Source: Sun Herald, "Organizations take on payday lending with education and options," Karen Nelson, April 28, 2013

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