Payday loans or cash advances are a trap, not a form of help

On Behalf of | Jun 21, 2022 | Bankruptcy |

Your credit card bill is due the same day that you have to drop off your rent payment. You have a full paycheck coming on Friday, but that is nearly a week away. You need money, or you won’t be able to pay all of your bills on time. You don’t want to pay any late fees or hurt your credit score, so you might consider stopping off at a cash advance business to obtain a payday loan.

When you have proof of employment, you can potentially get hundreds of dollars in cash before your employer cuts your paycheck so that you don’t pay your bills late. These businesses are easy to access and can help you quickly resolve a temporary gap in your budget.

Unfortunately, when people turn to payday loans and cash advances to cover their bills, they often find themselves trapped in a financially devastating cycle instead of avoiding financial hardship.

Payday loans have incredibly high costs

Most credit card lenders and banks are subject to both state and federal limitations on how much interest they charge. Short-term loans from payday lenders and similar cash advances are often subject to substantially higher interest rates and major fees.

There are fewer regulations in place to protect borrowers from abusive interest rates and excessive fees. After the company takes its repayment from your next paycheck, you may find yourself even further behind financially and in need of another loan to pay your next batch of bills that come due. The costs you pay for borrowing that money will create bigger financial issues that a simple cash advance can no longer fix.

Bankruptcy can get rid of debts instead of delaying them

Instead of falling deeper into debt by borrowing money from predatory lenders, it may be far more beneficial for you to look into a permanent solution to those out-of-control debts. Bankruptcy can lead to the discharge of the balances that you always do unsecured creditors, forever freeing you from both collection activity and payment obligations.

Recognizing how some so-called debt solutions just cause worse financial hardship can help you make more responsible choices about your current financial woes. Turning to personal bankruptcy when you can’t meet all of your monthly financial obligations can result in a more permanent resolution to your current debt issues.