When you have more bills than you can pay, you start to look for any way to get out of debt and keep current on monthly obligations. Some people turn to friends or family, take out a consolidation loan, or try to refinance their home. But you have to be careful when looking for ways to transfer debt, so you don’t end up owing more and so that you actually make progress on getting your debts paid. A question that often arises is whether a consumer with overwhelming debt should take out a payday loan to get out of debt.
Taking a payday loan to get out of debt is not a good idea. Typical payday loans have characteristics that make getting out of debt impossible, such as:
• High interest rates, which are considered by some to be more than what the law allows
• Prepayment penalties, on the off chance you are able to pay off the loan before it is due you might end up paying more because a prepayment penalty could be added to the balance
• Payment due dates that come up quickly, there is usually a fast turn around time on repayment of a pay day loan and depending on your financial picture you may be unprepared to make the payment when it is due. If so, you will face more interest and penalties.
• Fees and costs that add to what you owe, which can make the payment beyond what is within your budget and cause you to rack up more fees and costs on top of the accumulating principal and interest amounts.
One alternative to a payday loan not mentioned above is to file for bankruptcy. Bankruptcy will not require you to pay exorbitant rates on the debts you do repay, and in fact you might even be entitled to lower interest rates rather than increases. Depending on the type of bankruptcy you file, you can reduce the rate on your auto loan and you can also reduce the total amount of unsecured debt you owe. Those are common components of a Chapter 13 case, and in a Chapter 7 you will be entitled to have your unsecured debt completely forgiven. Rather than spin your wheels and go nowhere fast by taking out pay day loans, consider bankruptcy to help get you out of debt. We have filed cases for people with all sorts of financial situations, and will work with you to file a case that meets your needs.
For more information about bankruptcy, contact us at www.DsouzaLegalGroup.com.