Submitted by Jen Jones on Thu, 10/15/2009 - 8:06am
Getting a pay day loan can be ever so tempting. You think to yourself, I only need a "bridge" until my next paycheck; this is a "short term" solution for a "short term" problem; this is an easy "fix"; I can get help without going through the humiliation of a credit check I'm bound to fail. These are the kinds of messages pay day loan companies relay in their advertising, which also goes a long way to generate the impression in you that these companies--unlike the large, impersonal banks who don't seem to want your business--are run by people who just want to help you. Don't fall for it--sometimes nostalgia is for the birds!
If you find yourself constantly relying on payday loans, your financial strategies need a drastic makeoverâ€•fast. There is no better example of throwing good money after bad; the first loan transaction with a payday loan company is a huge rip off, and every subsequent one is more of the same.
Payday loans rake in a lot of money even though they are lending to high risk customers. So how do payday loan companies make their money anyway? By counting on you to roll over that loan. The company knows, perhaps better than you, what is likely to happen. You are in financial trouble, obviously. You are short on cash, or you wouldn't have requested the loan in the first place. So what's going to change in your financial circumstances between now and your next paycheck? Probably nothing. The only difference will be that part of that paycheck will be gone before you get it. Chances are all too good that soon--even as soon as the very next paycheck--you will need to rely once more on a payday loan. Where does it end?
Let's look at the math. Say something comes up and you unexpectedly need about $500. You can usually spare about $200 out of your paycheck for incidental expenses, so that leaves you with $300 to make up. So you decide you will borrow the $300. You go to a payday loan store and they ask you for a check, postdated for the date of your next paycheck, for $345. This means you are paying 15% interest for a loan that lasts two weeks, or in other words, the equivalent of a 391% APR! This is bad enough, but you're probably thinking it's a one time deal. The problem is that your next paycheck arrives, your expenses are the same as they ever where, only now you have a shortfall of $345. Remember in the original example you only had $200 to spare, so where does that extra $145 come from? Most probably another pay day loan.
Luckily for residents of North Carolina, pay day loan companies formerly operating in the state were shut down thanks to the efforts of the state's Department of Justice. Now "alternative" lenders must operate under state rules, or look to other states for vulnerable customers. However, the danger is still present. Online payday lenders are increasingly available, and can suck your finances dry before you know it. If you are even considering a payday loan or payday advance, filing for bankruptcy protection may be a better option--a lasting, transformative step that can truly form that bridge between the problems of today and the financial security of your future.
In North Carolina, contact the Law Offices of John T. Orcutt and get debt free today. Call +1-919-646-2654 today or visit www.billsbills.com for more information.
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