Payday loans can help when you need money sooner than later. Unlike other loans, payday loans are faster in terms of access and shorter in length of use. Knowing how payday loans work is important if you are considering using them. Exploring the costs and benefits of payday loans may help you decide whether to use them or not. However, if you find yourself dealing with bankruptcy, then try talking to a Tullahoma bankruptcy attorney for guidance.
How Payday Loans Work
You may have heard about pay day loans, quick loans that are due by your next paycheck. What makes pay day loans unique is their short-term length, high cost, and how soon they are due in terms of payment.
They get their name because most people use them while they are waiting for their next paycheck. Once the paycheck comes in, the person can pay the loan off. This is why pay day loans are often thought of as an early paycheck.
However, pay day loans tend to be restricted in certain ways. For example, many states have created laws to protect consumers by limiting pay day loans to $500 or less. Due dates for these loans are often the length of a paycheck, about two to four weeks. The loan is expected to be fully paid by these due dates.
While this may sound helpful when you need money before your next paycheck, there are costs and benefits to using these loans. Some of the costs are so high, that some states do not permit pay day loans.
Costs and Benefits of Payday Loans
The benefits of a pay day loan are having money sooner than later to cover an expense before your next paycheck. However, the costs of pay day loans include monetary and credit risks. For one, the interest rates for pay day loans are substantially higher since the length of the loan is so short.
This means the money you borrow will grow rapidly within those weeks before the deadline. When people cannot pay the loan by the deadline, many people find themselves falling deeper into debt by borrowing money again. Debt can grow rapidly when this pattern develops.
Credit scores can start falling when pay day loans are not paid on time. The way this works is the person cannot pay the first pay day loan in time, so the loan is rolled over. This adds more money owed with high interest, making the person fall deeper into debt.
Exploring alternatives to pay day loans might be a better option. These alternatives include paycheck advances, borrowing from loved ones, credit counseling, and debt settlements. You do not have to settle for the high risks of a pay day loan when you have these other financial options.
Call Tom Bible Law for Legal Aid
Going through financial challenges can become highly stressful, especially if bankruptcy is involved. You can contact us at Tom Bible Law today at (423) 424-3116 for a consultation about your finances. Our legal team of Tennessee bankruptcy lawyers might be able to help you escape your financial dilemma through bankruptcy. We can be found in the Tennessee cities of Chattanooga, Kingsport, and Tullahoma.