Wisconsin residents who need cash immediately or are recovering from a personal bankruptcy may worry that their borrowing options are limited. It can be tempting to listen to the promises made by payday lenders, which are often targeted toward those who just had a bankruptcy discharge or are struggling financially. You may benefit from understanding the potential dangers of payday lending.
As Money Crashers explains, payday loans can seem like a dream come true to those who need a fast, small loan. The ads promise quick cash with no credit check and an easy loan renewal when needed. If you have bad credit and just need a couple hundred dollars to get you through to your next paycheck, a payday loan can be too much to resist. After all, you would repay the loan in full by your next paycheck.
However, after the loan is repaid, you might not have enough money left over to make ends meet, so you would need to take out another loan. This is called the payday loan trap, and it is all too common for payday loan borrowers. In fact, the typical payday loan borrower takes out about eight such loans a year and pays more than $500 in interest. In contrast to the average 25 percent annual percentage rate for loans to people with bad credit, the interest rate for payday loans is astronomical – up to 391 percent.
If you recently went through a bankruptcy or are trying to avoid one, you may want to consider other options before resorting to a payday loan. This information is not intended as legal advice.