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Payday loans are very high price loans. They are small term loans with extremely high interest rates. The lender gives you cash and you either write a personal check payable to the lender for the amount you want to borrow, plus a fee or you authorize an electronic withdrawal from your checking account on the due date. The payday loans are for short periods of time, one to four weeks.
Payday loans are very easy to get. In such a transaction, the borrower will provide to the lender items like a paycheck, stub, photo identification and a recent bank statement. The borrower writes a check to the lender for the amount and the lender’s fee. Under law in some states, the lender’s fee is limited. The lender agrees to hold the check until the customer’s next payday, up to 30 days. At that time borrower may redeem the check with check cash, allow the lender to deposit the check or roll over the loan by paying another fee.
But payday loans may be very dangerous if one does not know the nuances of it. As an example, the plight of Melissa Hayworth can be cited who came under the grasp of payday loan. She was making $8 an hour as a temporary worker, trying to raise her two sons by herself and barely making ends meet. At that time she was in seventh heaven as she could easily get the amount of money she longed for. But unfortunately, she was unaware of the drawbacks of the loan system. Also, the clerks at the check-cashing facility didn't explain the loan terms or interest rates when they gave her the money.
Eventually, she found out the hard way. Every payday she had to run back to the payday-lending persons or company to obtain another loan. As she directly deposited her paycheck, she had to let her lender cash her check. But then she had to go back to get another loan immediately because then her paycheck funds started to become short. In two years, Melissa took more than a dozen loans, borrowed over $9,000, and paid over $1,500 in fees. And those were just the transactions she documented.
Melissa was saved from the trap by her brother, only when he came to know about Melissa’s deplorable condition. She escaped emptying her entire checking account to stop the vicious cycle. Here we have discussed the plight of only one Melissa, but who knows how many Melissas are facing the payday loan problem all over the globe. Negligence of government to let the people know what may be the motifs of the pay-lending company is one of the prominent causes of their sufferings. Below are given some instructions so that the people can be aware of such companies in their near future.
(1) Stop borrowing from payday-lending agencies.
(2) Talk to a legitimate professional debt counselor.
(3) Think of ways to improve your earnings potential.
(4) If your finances are really in dire straights, see if you can borrow some money from a friend or family member until you can get on your feet. You may hate doing it but it’s better than getting caught in another high-interest loan arrangement.
(5) Do not lose your moral. Even a mountain of debt can be climbed with hard work and persistence.
To wrap up the discussion it can only be urged that payday loans are a serious matter that is to be dealt with extreme care and caution. Otherwise, anybody can be its victim.
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