Have you taken a payday loan? Maybe your car’s brakes went out, and you had no other way to work. Maybe your dog got sick, and the vet bill was a bit heftier than you were prepared to handle. Whatever the reason you got there, you are starting to realize that those loans aren’t a financial solution, at all. Instead, they’re mostly just traps for the unwary.
Usually for a few hundred dollars, payday loans are too small (and needed too quickly) for a bank to be interested in making them. Many of the people needing these kinds of loans have credit issues that make it impossible to get a regular loan, anyhow. The payday lenders were happy to cater to that market — but only for outrageous fees and an exorbitant interest rate.
Florida restricts payday loans to a maximum finance of charge of 10% per $100 and a 304% annual percentage rate. The maximum you can take at one time is $500, and you cannot “rollover” the loan directly by only paying the interest. After two back-to-back loans (which people resort to instead of the rollover), there’s a mandatory two-day wait to take another loan.
What happens is that when the loan comes due, it eats away much of your next paycheck, which forces many people into an endless cycle of payday loans — as they continue pouring money for interest and finance charges into a black hole of debt. Plus, there are always unscrupulous lenders in the state or online who are willing to ignore the state’s laws and issue multiple loans or bigger ones — and people desperate enough to take them.
Resorting to payday loans is usually the signal that your financial distress is getting overwhelming. If your debts have you feeling buried, find out if a Chapter 7 bankruptcy can help.