Posts Tagged ‘payday loans’

Avoiding The Debt Trap

Not all debt is bad and most people can’t avoid accumulating some debt, unless they’re heir to some massive fortune. Having said that, some debt is just plain toxic and should be avoided like the plague.

Payday Loans/Cash Advances

Payday loans let you borrow money from your next paycheck. They’re meant to act as a stop-gap when you have an emergency expense that is outside your budget. However, payday loans are a deadly trap because of the way they’re structured and the expensive costs associated with them. For one thing, they’re extremely short term and must be paid back, in full in one to two weeks.  If you’re already living paycheck to paycheck,  you’re almost certain to be short after paying back the payday lender and need another advance from your next check, plus an additional fee to last you until your next pay day. This is how payday lenders make their money and how the payday debt trap closes.

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Bad Credit Financing: Designed For Failure

bad credit

Lenders and brokers who loan money to people with lower incomes and spotty credit will all claim that they provide a valuable service to a community that is underserved by traditional lenders. But do they really? Or are they instead exploiting the plight of our most vulnerable citizens by promoting an endless cycle of debt and making a killing off the interest and other fees they charge?

While it is a good idea to give people who might not normally have the access to financing a leg up, surely that leg up should not also come with a heavy weight attached to it in the form of draconian and exotic terms that make it close to impossible for the borrower to successfully meet his obligations.

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Wisconsin Legal Aid Attorneys Fight For Interest Rate Cap On Payday & Car Title Lending

Wisconsin Legal Aid attorneys Andy Gehl and Bruce Speight say that the only way to protect consumers against what they call “irresponsible loan products” is to introduce an interest rate cap on payday and car note loans.

The attorneys contend that payday lending and car title lending all too often lead to a revolving cycle of debt and that the way these loans are structured prevents people from being able to repay them.  These types of loans have interest rates that exceed 400% on an annualized basis and the true costs of financing are often concealed from the borrower.

There are presently two bills to regulate payday lending  and  car note lending under consideration by the Wisconsin Legislature and neither of them contain the cap. Attorneys Gehl and Speight say that without an interest rate cap, the lenders will simply alter their product to conform to the letter of the law without also conforming to the spirit of the law. In other words, it will be business as usual for these companies.

Payday Loans: Legalized Loan Sharking

 

The payday loan industry likes to say that it provides a service to underserved low income communities where credit may be otherwise hard to come by. They also claim to provide emergency funds for people with a one time cash shortage. 

The truth is that payday lenders are nothing more than legalized loan sharks, and while the consequences of not “paying up” when the loan comes due are not as dire as broken legs and fingers, they are just as crippling.

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