There are likely many people in New Jersey that have taken out a payday loan at some point in their adult life. These “short term” loans can end up costing consumers for weeks or even months. For some consumers, their need for payday loans may even be a precursor or a contributor to filing for bankruptcy protection.
Depending on what state a consumer lives in, the interest rate on payday loans can end up being astronomical. Varying by state, the APR could be anywhere from 368.91 percent to 661.78 percent. The only constant is that the rate can make paying back a payday loan difficult, at best, for consumers that are already struggling.
Not very many consumers are able to pay back the entire loan when they receive their next paycheck. Additionally, there is always the risk that the lender will make an automatic withdrawal from a consumer’s account for payment, causing that an overdraft. In some cases, consumers are paying upwards of $520 in finance charges on a loan that averages $375. There are alternatives to traditional payday loans for some consumers, but even those loans end up having APR’s upwards of 120 percent. Consumers may want to explore all other possible sources of money before turning to payday loans.
Consumers that find themselves caught in a payday loan trap may want to consider the benefits of filing for bankruptcy protection. Those in New Jersey that are struggling to pay back these loans are usually also struggling with their regular bills and may need help in finally conquering their outstanding debt. Bankruptcy protection can give a filer the space he or she needs to evaluate his or her financial situation and get back on track. Having the opportunity to get a fresh start financially could be just what a struggling consumer needs.
Source: USA Today, “Your Money: Payday loans can get out of control,” Susan Tompor, March 10, 2013