Payday Loans: Myths & Facts

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Payday Loans: Myths & Facts

Payday loans or cash advance loans are small loans which are taken by a person against their wages and can be paid off at the time of their next paycheque. For people who have been facing financial issues for some time, payday loans are a common feature. Many of them who have been contemplating bankruptcy as a way of getting out of such problems had taken payday loans in their past.

Getting a payday loan is not difficult. The borrower can ask for a payday loan from a lender in the form of a post-dated cheque by showing them proof of employment. The cheque is drawn for the amount that the borrower requires plus the interest amount. The lender will hold the post-dated cheque till the borrower’s next payday in lieu of the borrowed amount given to the individual. When the amount is due, the lender can deposit the cheque and get their amount back. In case the borrower requires more money for any other reason by the time payday comes, the lender can hold the cheque at additional charges. Despite sounding easy, borrowing money through payday loans can be very costly, with sometimes interest costing close to 400%!

Lawyers of Los Angeles based law firm Recovery Law Group inform that consequences of taking out such a loan, but, being unable to pay it back can have bad consequences like:

  • Relentless calls by lenders for pursuing payment.
  • If the lenders have the authority, they can overdraw your checking account by automatic withdrawing of money.
  • You can be sued by the lender for the amount of loan plus attorney fees and court charges.
  • The debt can be transferred from the lender to a debt collector.
  • If and when they get a judgment against you, the lender can garnish your wages too!

The only respite you have is that such lenders cannot put you in jail. This is so because they are aware that you lack the funds in your account when you have issued the post-dated cheque. Thus you cannot be held guilty of knowledgeably issuing a bad check.

Payday loans are one of the last resort by individuals facing economic problems before eventually filing for bankruptcy. In case you have reached the point, where you have to rely on payday loans, you should get an evaluation by bankruptcy lawyers by calling at phone number – (888-297-6203).