Payday Loan Debt

Learn How To Avoid Payday Loan Debt And Be Debt Free

What Are Payday Loans?

Generally, Payday loans are advances made through cash in exchange for post dated check, usually dated about a fortnight after the date of cash advanced. The interest rates for this type of loan is exorbitant and it is nearly not wise for a salaried person to avail this loan facility. The interest is normally calculated on APR rate of 400% - 500%. And for a small additional fee, the borrower can stretch the time to deposit his check and the loan repaid.

What are usury laws and how does it affect payday lenders?

Nearly nineteen states have these usury laws which top interest rates or curtail small loans. In attempting to do so, they run around these usury laws. Payday lenders term their lending charges as "fees" and not interest. They have an argument stating that the APR rates, upon which they calculate the interest for the borrowers, fails to reflect the actual interest charged, as most debtors or borrowers repay their debts in a short period of time. And according to the courts, the fees charged by these payday lenders, are not interests. Depending upon the laws prevailing in the individual state, a borrower has the power to get back all of the interest and principal on loans taken, which violates usury laws.

How do I Avoid the Payday Loan Debt?

Avoid adding on more and more payday loans. It is not a wise idea to take a payday loan in order to repay another. By doing this, it creates a bigger debt trap. Hence, find a different solution. May be you can work out a strategy with the payday lender itself and find solution. And if your lender refuses to cooperate with you on this, you have the right to buzz your state's DFI for help!