Payday Loan Abuse
Payday loans are a
useful and necessary financial tool that can give you the quick
cash you need in an emergency. Whatever, the reason, a
short-term loan gives you access to funds quickly, and with very
little credit checking, quick applications and efficient
approvals. In most cases, the cash is deposited into your
account or a check is received almost immediately.
The problem arises
when people misuse the payday loan and end up
buried in payday
loan debt, often with more than one payday loan to payoff because of the payday loan cycle.
The
Payday Loan Problem
Most often the
borrower gives the lender their checking account information to
deposit the funds on the loan date of origin and to retrieve the
payment on the next payday. If a borrower cannot pay back the
entire loan on the next payday, the borrower will renew the
loan, by paying a fee which is not credited again the principle
amount owed. Here is an example to better explain the process:
Joe borrows $1000, but at the next payday he cannot afford to
pay the entire amount back. The payday lender collects $150. Two
weeks later the lender collects another $150. At the end of the
day Joe has simply, "renewed" his loan twice and still has not
paid any of the $1000 principle.
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