If you’ve fallen behind on your bills and aren’t sure how you’re ever going to catch up, then you’re likely considering any solution that could result in relief from the difficult financial situation you’re living in. If you’re like many California residents in this situation, you’ve thought about taking out a payday loan. At The Law Offices of Paul Y. Lee we understand the appeal, but in almost all situations, declaring bankruptcy is the better long term solution. Read on to learn why.
Payday loans are only a good idea if you are 100% sure you can pay them off quickly
If you have a one-time expense that’s come up and you have just a few days until payday then it might be an okay idea to get a payday loan. However, if you’ve been having financial issues for a while, and have reason to believe that they’re likely to continue, then now is not the time to take out a payday loan. If you expect it to take longer than a week to pay off the loan then a payday loan is not the right choice.
The interest rates on payday loans are incredibly high
You’ve likely heard that the interest rates on payday loans are high. You may have thought that it didn’t matter because you need the money. However, keep in mind that the annual interest rates on these loans are truly incredibly high. How high? Typical APRs are between 300% to 400%. Consider that credit cards with very high APRs only go up to about 35%. Almost any option is better than a payday loan if you’re going to have it out for any period of time.
Payday loans often lead to a cycle of debt
It may sound like a good thing, but one of the bad things about payday loans is that they’re generally pretty easy to renew. For example, let’s say that you took out a payday loan for $1000 and paid a fee of $100 then you wrote a check for $1100. The loan comes due and you can’t afford to pay it so you simply pay the $100 and keep the balance of $1000. As many as 80% of loans are paid this way – and often times for months and months. Do you want to pay $100 every week just to keep your loan from coming due? That’s the situation many people find themselves in.
Bankruptcy could actually change your situation
Payday loans are useful in very specific situations but they aren’t going to change your financial situation in the long run – unless they do so negatively. At The Law Offices of Paul Y. Lee, we offer bankruptcy options that could lead to a long-term break from your financial reality. Call us today at 951-755-1000 to get your free consultation and to learn more about common bankruptcy myths, solutions, and stories. We are here to help strengthen your financial future.
