Accumulating debt is not something that happens overnight. Typically, it is something that people struggle with for months or even years as they try to keep up with mounting medical bills, mortgages, student loan payments and other common expenses. Eventually, a payment can get missed, and then the penalties start adding up and ultimately, a person can get buried under debt that never seems to go away.
In an attempt to avoid getting into this position, some people may opt for seemingly easy solutions that promise to be quick and effective ways of getting money. A common service is a payday loan. These services may be effective at getting people money quickly, but the long-term consequences of the loans are likely to outweigh the immediate benefits. Consumers in New Jersey may want to be aware of just how expensive these loans can be.
Payday loan companies often market their services to low-income families who are in a financially vulnerable position. They may not have enough money to buy groceries or gas to get to work, so these loan companies promise that with little more than an ID and pay stub, they can almost immediately get loans to help them cover their expenses for a short time. And often times, they do just that.
But very quickly, the huge interest rates and fees begin to add up, making it virtually impossible for some borrowers to pay off the initial loan. It could end up taking months or longer for a person to pay off a $300 loan, which could ultimately end up costing a person nearly $1,000 when all is said and done. In some cases, people take out another loan to help them pay off the first one.
Rather than get stuck in this frustrating cycle of borrowing and repaying more than the initial amount, people who are struggling financially may want to consider other options that can tackle the problem, rather than make the situation worse. There are many different debt relief options available, including bankruptcy or mortgage modifications, which can help people deal with their debt and make a plan that can provide both relief in the short term and support in the long term.
Source: Business Insider, “6 Outrageous Facts That Show How Payday Lenders Screw Consumers,” Hayley Peterson, Oct. 25, 2013
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