It’s no secret that the United States economy has been in a slump over the last several years. While the economy does seem to be improving slowly, there are still many people who need some form of debt relief or financial assistance to pay off student loans or mortgages. An effective form of legal debt relief can be found in bankruptcy filings such as Chapter 13 bankruptcy. Some people may try to take a seemingly quicker and easier way out in the form of payday loans, but these individuals may become trapped in a cycle of endless debt.
A payday loan may seem to be a quick and easy answer to unforeseen financial issues, but the businesses making payday loans exist to make money and not to reduce burdensome debt. Experts go back and forth on the issue of payday loans. Some try to convince people payday loans are simply a quick cash solution while others maintain they are debt traps. For example, one payday lending company claims that 98 percent of its customers found satisfaction from their loans. However, a recent report claims that the vast majority of payday loans, as many as 80 percent, are given to individuals stuck in a “debt trap,” meaning that the continual rolling over of loans is likely to keep the customer in debt for more than 11 months.
Although Ohio is not one of them, 13 states have banned the practice of payday loans. Still, it’s important to know that one state’s senator claims payday loans are “predatory, abusive products” intended to keep people down with a never-ending cycle of borrowing and being indebted.
A very distinct and simple difference can be found when comparing Chapter 13 bankruptcy filing and payday loans: A Chapter 13 filing allows people to repay their debts with a debt relief plan catered to their circumstances, and payday loans require people to pay the loans back at very high interest rates, with little to no regard given to their individual circumstances. If you’ve fallen on hard times and need some form of debt relief, bankruptcy may be a much safer and more effective option.
Source: Consumerist, “Believe It Or Not, Outlawing Payday Loans Will Not Lead To Looting & Pillaging,” Ashlee Kieler, April 6, 2014