How Payday Loans Could Cause a Potential Bankruptcy
We all get into a money crunch from time to time. Then we end up using credit cards to take care of our needs, or we might ask a friend or family member for a small loan. But if you don’t have those resources available or if your debts have gotten to the point that you can’t keep up anymore, you may have to start looking for alternate options. A payday loan is a popular option because it offers instant cash for those who don’t have good credit or who have limited financial resources. The only thing you have to do to get the loan is show that you have a paycheck coming.
The problem with payday loans is that they are way too accessible to those who shouldn’t be taking on more debt and that they come with outrageous interest rates. Many payday loans charge as much as 400 percent interest. You can easily pay back the loan two or three times over in a very short amount of time.
Repaying the Loan
When you first take out a payday loan, you may have the option to write a check for the full amount plus any interest and fees. You can post-date the check and leave it with the lender. When you are paid, the lender will cash the check and the loan will be paid in full.
The problem with this scenario is that you are likely going to find yourself in the exact same situation that led you to taking out the loan in the first place. You are going to be left with no money until your next paycheck comes. You may even be in the negative a bit if you didn’t have enough to cover interest and fees. You’ll either have to take on another loan or find other ways to borrow, putting you in a perpetual debt cycle.
You can also choose to pay the loan back yourself in increments, but you’ll be running against the problem of the excessive interest rates. Your debt will quickly balloon, and you will add to your financial pressures. You’ll soon get harassing phone calls from the payday lender, and you may even face threats of a lawsuit. You will have only compounded your financial problems.
Bankruptcy for Debt Relief
Filing for bankruptcy is an effective way to get the debt relief you need without creating more problems for yourself. If you file for Mesa Chapter 7 bankruptcy, you may be able to discharge all your unsecured debts, which include credit cards, payday loans, medical bills, and other personal loans. You can file for bankruptcy to avoid taking out a payday loan, or you can file for bankruptcy to deal with the problems caused by taking out a payday loan.
If you file for Chapter 13 bankruptcy in Mesa, you can get a three- to five-year repayment plan that lets you get a better handle on your debts. Your interest rate will be lowered, and your monthly payment will be more affordable. Any debt leftover at the end of the repayment period can likely be discharged.
Bankruptcy can help you get out from under crushing debt and start taking control of your finances again. In certain cases, it can even help you hang onto your home or your vehicle. It can free up the money each month to take care of your needs, to minimize your debt, and to start building the safety net you don’t have now. Talk to an experienced bankruptcy lawyer in Mesa to learn how bankruptcy might be able to help you get debt relief.
My AZ Lawyers helps people in the Phoenix, Glendale, Mesa, and Tucson areas get debt relief through bankruptcy. Talk to one of our Mesa bankruptcy attorneys about whether you qualify for Chapter 7 or Chapter 13 bankruptcy. Your lawyer will thoroughly review your finances to help you understand which filing would help you get the maximum financial benefits. Your attorney will then file quickly to help you get debt relief as soon as possible. Contact us today o speak with an experienced bankruptcy attorney about your options. We’re ready to help you start rebuilding a life free of debt.
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