In today’s world of high-interest short term loans, we here at Help With Payday Loan Debt decided to add a page containing a complete guide to getting and paying off a payday loan
We will cover the different types of payday loans available and how they rate against the state by state payday loan laws.
We will also cover information on what payday loan traps are and how to:
- Recognize them
- How to avoid them.
- What to do when caught in one.
So many people are getting in trouble with these loans and the more information we can post on our website about them the better armed you, the customer, will be!
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Are payday loans legal?
That depends on the state you live in. Thirty-Two States Authorize High-Cost Payday Lending and 18 states have either banned them completely or have restrictions on them.
What is a payday loan?
In general a payday loan is a high-interest, short-term loan that will automatically take the total amount of your loan out of your bank account plus a high-interest rate and fee charges on your next payday.
This usually adds up depending on the state to around $75.00 per $250.00 borrowed on a two-week loan.
As you can see the interest and fee and interest rate is large, but if you pay the loan total off on your next paycheck and be done with the loan you will be alright.
The key here is to pay off that loan in a one-time lump sum payment, do not ever extend a payday loan or take out a new one to cover a current payday loan payment.
These last two points are part of the payday loan trap that exists with these types of loans, and you can read about those below.
Let’s take a look at the different kinds of payday loans available in the United States today.
There are basically two types of loans available and they are completely different entities with their own unique rules and lack of rules.
Brick and Mortar Payday Loans
These are the storefronts you see in your town.
Their legal status will vary from state to state depending on the state you live in.
Some of these stores can also offer other services like insurance quotes and will even do your taxes at the end of the year.
They basically work on the premise of you post dating a check for your next payday that will cover the cost of the loan, the interest of the loan and the original balance of the loan all combined into one payment.
Example:
- Payday loan amount on a 2-week loan: $250.00
- Interest charge $60.00
- Fees $15.00
- Total payback $325.00 on your next payday
Your payment will be electronically deducted from your checking or savings account on the due date.
Online Payday Loans
These loans are pretty much the same as brick and mortar payday loans with the exception being these companies can be based anywhere in or out of the United States and will do business even where banned.
They have a unique payback agreement being they will only take the interest and counter fees due on the original loan out of your bank leaving you with the original loan balance plus another batch of counter fees and the new interest charge for the next loan period.
You need to call the company and specify what amount you want applied to the loan 3 days or more prior to the payment due date.
Example:
- 2-week payday loan $250.00
- Interest $60.00
- Counter fees $15.00
- Total amount due on next payday $325.00
If you do not inform them that you would like this complete loan total or partial payment amount taken out of your bank account on your next payday, they will take out the interest and fees payment of $75.00 leaving the original loan balance of $250.00 remaining.
They will then add a new fees and interest charge to the remaining balance and your new loan will again be the exact same as the one you just made the payment on.
In essence, you just borrowed $250.00 for two weeks at a charge of $75.00 and your balance after the payment will be $325.00 again.
As you can see, this is a payday loan trap and it is easy to get caught in it and extremely hard to get out of.
Always make sure that any payday loan you take out is paid in full on the first due date, PERIOD!
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Rule of Thumb!
- Always pay your payday loan off in full on the first due date, PERIOD
- You must be very careful with online payday loan companies as they are ruthless and many are less than legit.
- You really have no recourse with online companies that are not based here in the USA. It is best to avoid these loan companies completely.
- Never extend a payday loan for any reason
Payday loan traps are the result of three things:
taking out a payday loan to make another payday loan payment or pay other debts while you have an active loan running
You do not maintain an online payday loan and keep getting hit with the interest and fees charges, over and over.
You extend your payday loan or take out multiple loans
Your bank account can also get trashed with overdrafts due to the loan companies trying to take out their payments so it is a must to have the loan paid off in full on the first due date PERIOD!
If you do find yourself in over your head with payday loan debt get hold of a payday loan consolidation company ASAP, even if you only have one active payday loan. They will get your finances back under control quickly and get you back on track.
