Payday loans are the gift that keeps on taking

You have certainly been in this situation before. You need money fast, maybe for a car repair, medical bill or simply to buy groceries. However, it's still a week until payday, and your bank account is dry. You pass the Mississippi payday loan store every day on your way to work, so you stop in to see if they can help you. Of course, they can, and you leave the store with the money you need to hold you over until your paycheck comes.

Unfortunately, other creditors already have a claim on your paycheck. Maybe your bank automatically withdraws the mortgage payment from your account, your child support payment is due or the electric company will shut off your power if you don't pay, so when the payday loan is due, you don't have the money. No problem, right? You can just roll it over to the next paycheck. You're bound to have the money by then. Right?

Spiraling out of control

What seems like a solution may compound the problem for many people who seek help through payday loans and other short-term financing. These lenders offer smaller amounts of money than traditional loans for shorter periods of time -- typically weeks. Payday lenders may not do a credit check or even verify that you have enough income to repay the loan. Other drawbacks to payday loans include the following:

  • The entire loan amount is due at the end of the term.
  • Interest rates can be 300 percent APR and higher.
  • You may have to use your vehicle as collateral.
  • You may leave essential bills unpaid to avoid the penalties of defaulting on your payday loan.
  • There is a high probability that you will have to re-borrow the loan, adding more fees and interest to your debt.
  • Lenders may require access to your checking account to debit the loan payment.

With authority to withdraw the balance due from your checking account, some lenders will make repeated attempts to access the money if they are unsuccessful because you do not have enough in your account. A new rule by the Consumer Financial Protection Bureau limits the lender to two attempts to debit the loan payment. After that, you must grant authorization for further tries to withdraw money. However, each failed attempt to withdraw money means bank over-the-limit fees for you and may even result in the bank closing your account.

The CFPB has recently passed other new rules designed to protect people who use payday lenders. However, financial advisors warn consumers that payday lenders are rarely the solution to their debt problems and often make them harder to overcome. If you are struggling with debt that makes it difficult for you to make it to the next paycheck, you may need professional assistance to examine your options for debt relief.

No Comments

Leave a comment
Comment Information

Office Location

7160 Tchulahoma Road Suite A5
Southaven, MS 38671

Toll Free: 888-341-8136
Phone: 662-655-1605
Fax: 866-267-5360
Southhaven Law Office Map

Review Us