Mississippi has some of the highest payday loan rates

Mississippians who are facing financial challenges have a number of ways to combat their bills and get debt relief. There are both short-term and long-term options. Some may find that getting a payday loan is appropriate while others may find that Chapter 7 bankruptcy is a better solution.

Payday lenders allow individuals to get quick loans for around $400. Those who support these lending institutions argue that these loans are a good option for individuals and families who need some extra money to pay monthly bills like energy and grocery bills.

There are some downsides to these loans, however. The interest rates charged on such loans are significantly higher than credit card and mortgage interest rates. In fact, Mississippi has some of the highest annual payday loan interest rates such as 574 percent. Payday lenders also tend to establish themselves in more impoverished areas, suggesting that they may be attempting to prey on people struggling with debt.

These statistics are partially linked to how it easy it can be to secure a payday loan. The qualifying factors include proof of income, a driver's license, a Social Security card and a bank account number. No collateral or credit history is required.

It is useful to compare these requirements with those for filing for Chapter 7 bankruptcy. Chapter 7 bankruptcy is a tool available to individuals who are unable to repay their debt. Instead of perhaps taking out more loans to address financial difficulties, these individuals recognize it may be a better solution to actually get debts discharged and get a fresh financial start.

In addition to being unable to make repayments, a filer must also have an income less than Mississippi's average state income. If an individual's income is higher than the state average, the court may still allow a person to proceed with this form of bankruptcy if his necessary expenses dispose most of his income. A person will not be eligible if he has defrauded creditors or previously went through bankruptcy.

Clearly, there are several considerations that come into play when addressing finances. While some short-term tools like payday loans can be helpful, ultimately it may be prudent for Mississippians to get long-term help in the form of bankruptcy.

Source: businessinsider.com, "6 Outrageous Facts That Show How Payday Lenders Screw Consumers," Hayley Peterson, Oct. 25, 2013

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