You see them all over: Payday lenders. Are they legitimate? Should you be wary?
Nasdaq ran a recent article about how the payday loan business is doing. And here are a few things you should know about them:
1. There’s not really any limit on interest rates offered by payday loan companies. That means that if you borrow $200 against your paycheck and pay $30 to the payday lender for that loan, then you’ve just paid 400% in interest. By contrast, 36% is likely to be the upper limit charged by your credit card. Unfortunately, agencies that are supposed to protect consumers like the Consumer Financial Protection Bureau (CFPB), have not been given the power to “thwart” predatory lending practices by capping high interest rates.
2. Approximately 1,700 payday lenders closed up shop in the last year. Some of payday loan businesses are doing well, but it appears that the majority are not, and it also seems like many of them are likely to have a “fly-by-night” feel to them. Can you tell which ones are legitimate and which ones aren’t? If not, best to simply avoid them.
3. Despite the above, reliance on payday lending services is likely to increase. Why? Because banks are lending less due to tight credit markets. And payday lenders are one group well positioned to fill in the gaps (along with loan-sharks and other unsavory types). Unfortunately, an increase in this kind of lending is likely to lead to higher bankruptcy rates. Advice: Avoiding payday loans is a good way to avoid becoming another bankruptcy statistic.
Don’t allow payday lenders’ high interest rates push you further into debt. If you’re struggling to pay your bills, please feel free to contact Bruce Weiner, bankruptcy lawyers near me in Brooklyn for a free initial consultation.
