The Most Dangerous Type of Debt in The United States
Payday loans are considered to be some of the most dangerous loans for consumers. Many of these loans are predicated on predatory lending practices. These types of loans benefit the lenders and cause harm to consumers. They are often known to operate using unfair and abusive lending practices. These payday loans, if not careful, can get consumers trapped into a loan with no way of getting out. Different payday loan companies have different terms, however, the one thing they all have in common are high interest rates and are structured in a manner that makes it difficult for consumers to pay the loans off in a reasonable amount of time. These loans often do not require you to have a high credit score criteria and are simply based on your ability to make the payments on your scheduled pay dates. Payday loans are so dangerous to consumers because they typically target people in low income areas who have limited financial knowledge. These types of situations are causing many borrowers to seek the services of payday loan debt consolidation companies. Because of the never ending trap of these types of loans, consumers find themselves constantly seeking help with payday loan debt.
Payday loans have caused such controversy that in some states they are illegal.The states that have legalized payday loans have capped interest rates at 24% to 48% annually and require loan companies to provide a repayment schedule. While there has been a cap on interest rates in some states, excessively high interest rates still cause challenges when consumers wish to pay the loans back. Most loan companies will structure their loans in an all-or-nothing fashion. What this means is these types of loans can only be paid back if you pay the loan in full or continue to make monthly payments with the option of renewing the loan every month. Again, these terms can be quite unfavorable for borrowers. States such as Georgia, New York and New Jersey prohibit payday loans under their respective state laws. Other states have legalized payday lending but have mandated lower interest rates. Studies have shown that 2.5 million consumers either have a current payday loan or have applied for one at some point in time. Some borrowers utilize payday loans at least one time each year.
The high interest rates
One thing that makes payday loans so dangerous are the high interest rates. With interest rates that go as high as 40% to 50% annually, it’s no wonder why consumers are not able to pay back these loans in a timely manner. The higher interest rates make it nearly impossible for consumers to make payments that would affect the original balance of the loans. The better play for these loans are more short-term loans. Because these loans target individuals who have poor credit, this is a prime opportunity for payday loan companies to take advantage of consumers. These repetitive scenarios leave consumers in a situation where they’re constantly seeking payday loan debt relief. With no other options, consumers are constantly looking for ways to get out of payday loan debt and payday loan debt relief is often the alternative to paying off the loan in its entirety. There are some state laws implemented to the limit interest charged on payday loans, however, payday lenders are allowed exemptions which gives them the opportunity to charge higher interest rates. The rationale for payday loan companies to charge higher interest rates is because they’re dealing with high-risk consumers who pose a credit risk.
Payday loan terms
The loan terms for payday loans can be brutal. Once you apply for the loan, you are then expected to make the payments on your payday. If you are not able to pay the balance in full, the loan would be rolled over to another loan with additional fees. There are different terms used to reference payday type loans that include:
- Cash advance loans
- Deferred deposit loans
- Check advance loans
- Post dated check loans
Some of these payday loans require that you write post-dated checks or set up automatic payments. These types of loan terms are also associated with car title loans or other consumer loan debts. This payday loan debt cycle can motivate consumers to look for other alternatives such as payday loan debt relief. They are designed more to benefit the lender than the borrower. If you are using a loan that requires collateral such as a car, getting help with payday loan debt may be a bit of a challenge. While it is not impossible, there are ways to get out of payday loan debt.
Low income targets
As mentioned earlier, many payday loan companies target borrowers that have low income. Often, these borrowers are unaware of the dangers associated with payday loan terms. With low-income borrowers, their lack of knowledge pertaining to consumer financial debt can work to the advantage of a payday loan lender. Because of the lack of financial literacy of low-income borrowers, these lenders utilize tactics to attract bowers who are not financially savvy to make sound financial decisions. The lack of financial literacy combined with lower credit scores make low-income borrowers a prime target for these predatory lending practices. Other targets of payday loan lenders include:
- The elderly
- People with disabilities
- Military family members
Often, this population of borrowers have limited options for funding resources, therefore, payday lending is an attractive alternative. There are occasions when low-income borrowers become aware of the types of practices that are used to attract them as consumers. In those cases, payday loan debt consolidation is an option many low-income borrowers use to relieve themselves of the burden of these types of loans. Payday loan debt relief is an option that low-income consumers use and they have found that it is quite effective in helping to manage or completely alleviate the burden of these predatory loans.
Get out of payday loan debt
With one click of the mouse, help with payday loan debt can be a solution for many consumers. Payday loan debt relief companies are constantly helping consumers escape the burden of these risky loans. Payday loan debt consolidation is a favorable option when consumers consider the alternative of making payments on a loan that never gets paid off. As a consumer, there are ways you can break the cycle of the payday loans. Implementing a plan to pay down your debt is an effective option. There are some states that require payday lenders to offer extended payment plans to allow borrowers to repay their loans over a longer period of time. There are debt consolidation loans that can be utilized to refinance debts into a loan with lower interest rates and more favorable finance terms. Implementing a debt management plan is another option to get out of payday loan debt. Payday loan debt relief can come in many forms. The ultimate goal is to get out of debt and stay out of debt.
Exit Payday Loans on of the best companies can help consolidate your payday loan debt who have found themselves in this trap. They are able to help reduce monthly payments, lower interest rates and terminate over-the-limit fees. If you have found yourself in a situation where you have multiple payday loans, they can help you consolidate those loans into one loan with one monthly payment. Visit them at their website to get a free no-obligation quote or give them a call. They have representatives standing by waiting to assist you to provide you the payday loan debt relief you deserve.