Payday loans may seem like a simple, quick solution to your financial struggles, because they allow you to easily borrow hundreds of dollars from online lenders without the need for long applications or waiting periods. However, they can send your life into a downward spiral. One Kansas City man learned all too well how easily a relatively small payday loan can turn everything upside down.
The story of Elliot Clark is being told by advocates seeking to end predatory payday loan scams as an example, hoping that it will scare some potential borrowers away from short-term lenders.
How Dangerous Are Payday Loans?
Clark, a Vietnam vet, felt turning to payday lenders was his best option when his wife was forced to quit her job due to medical emergency. Since $22,000 in medical debt and the sudden loss of income had left Clark and his wife in a poor position, Clark took out five payday loans totaling $2,500 to help pay living expenses.
For five years, Clarke was making two monthly payments of $95 to repay the short-term loans which had principles of only $500. However, during those five years, the loans had stacked up more than $50,000 in interest. As a result of taking out $2,500 in payday loans, Clark and his wife were forced to give up their home.
The National Consumer Law Center says that Clark’s story is tragic, but not uncommon. Payday loans routinely prey on people in need and take advantage of them. Short-term payday loan providers have been banned in a handful of states for their predatory lending practices. Recently, Google even officially banned payday lenders from using its advertising platform.
What Can I Do If I’m Stuck in a Cycle of Payday Loans?
One of the most common problems people run into with payday loans is that they get stuck in a cycle. Sometimes, borrowers feel they have to take out another payday loan to pay off the first, and so on, and so on. This becomes a cycle of ever-growing principle and interest until the borrower cannot take it anymore.
If you get stuck in a payday cycle, the best thing to do is to STOP taking out more. It will only do more harm to continue buying into their scams. Instead, you may benefit from filing Chapter 7 bankruptcy. Filing bankruptcy will protect you from creditor harassment, and put a stop to the cycle.
Since payday loans are almost always considered unsecured debt, they are completely dischargeable in Chapter 7 bankruptcy. After a few short months, Chapter 7 bankruptcy can give you a fresh start, putting your payday loan problems could be behind you forever.
Washington, D.C. bankruptcy attorney Kevin D. Judd has been helping countless people rid themselves of crushing debt, allowing them to hit the reset and start fresh.