Do you find yourself trapped by a payday loan that you can’t seem to pay off? Call a Cleveland payday loan attorney today to learn more about your debt relief options. Luftman, Heck & Associates can help you.
What Are Payday Loans?
You’ve probably seen commercials or storefronts for payday lenders. They provide short-term loans to people who need a little cash to get them through to their next paycheck. Borrowers usually pay the loan back through a series of automated withdrawals from their checking or savings accounts.
But payday loans aren’t as convenient as they appear. What starts out as a simple loan with an APR of 15 percent, for example, can quickly snowball into a huge amount where the interest you owe may be as much as the amount you initially borrowed. The APR, or annual percentage rate, is calculated based on the amount you borrow for a one-year period. For example, if you borrow $1,000 at an APR of 3 percent, your first year of interest would be $30: 1,000 x .03 = $1,030. But payday loans are paid back in a much shorter time frame (usually two weeks), which causes the APR to skyrocket. In fact, people often end up paying as much as 400 percent APR on their loan. The incredibly high interest rates make it difficult to pay off the loan in such a short time, and before you know it, you are stuck in a cycle of debt that seems nearly impossible to stop.
Stop Payment Authorization
To avoid having a payday lender withdraw funds electronically from your account, you can revoke your “ACH authorization.” There are a couple of different ways you can go about terminating payments:
- Inform the lender. You can write a letter to the payday lender informing them that you have revoked your ACH authorizations, so they no longer may withdraw payments from your accounts. Send the letter via certified mail so you can get a receipt as proof that they received your letter.
- Inform your bank. Let your bank know that the payday lender is not permitted to make automatic withdrawals from your account. You may need to send a certified letter or your bank might have another method of contact they prefer.
- Close your accounts. If all else fails, you can close your bank accounts. This cuts off the source so your payday letter can’t continue with automatic withdrawals.
Remember that revoking ACH authorizations does not mean the loan simply goes away. You will still be on the hook for repayments. If you’re experiencing payday loan harassment because you can’t afford to pay, it may be time to contact an attorney about your options.
Avoid Getting a Payday Loan
Payday loans seem like a great choice because they’re quick and easy – you don’t have to fill out a tedious application, provide a bunch of extra documents, and wait several weeks for your money. They don’t even need to check your credit first. You apply quickly and show proof of employment, write a postdated check for the money you need (plus a loan fee,) and you’re all set.
But people soon find out that getting the money is much quicker and easier than paying it back. Borrowing a couple hundred dollars may take you weeks, even years, to pay back. By the time you’re finished, you find that you’ve paid so much in interest that your “small loan” grew considerably larger over the repayment period.
To avoid getting stuck with a debt that winds up being much more expensive that you anticipated, consider exercising all your other options first, such as:
- Work extra hours or get a second job. You don’t always have the luxury of knowing when you’ll need extra money, but if you do anticipate the need, see if your boss will give you a few more hours at work to plump up your paycheck. If you can’t work extra, look for a part-time job to supplement your income.
- Ask for an advance on your next paycheck. An advance is not a loan; rather, it allows you to take some money from your next paycheck to tide you over. Keep in mind, getting an advance means your next paycheck will be shorter than usual.
- Borrow from friends or family. Finance experts will tell you not to take money from family or friends. But every situation is different, and if you’re strapped for cash, those that love you don’t want to see you suffering. If you do ask a family member or friend for a loan, put everything in writing – repayment terms, amounts, and interest, if you’re paying it. Make sure not to borrow more than you can handle paying back, or you really will risk putting a damper on your relationship.
- Apply for a small personal loan at a bank. A bank loan may not be a solution for everyone – it can take a while to get approval, and the amount received will be based on your creditworthiness. But the bank’s interest rates are generally lower than a payday lender’s, and they will likely give you longer repayment periods.
- Consider a credit card with a special introductory interest rate. Again, this option may not be for everyone. If your credit isn’t the best, you may not be able to get a low introductory interest rate. But if you do score a credit card with 0 percent interest for the first 12 months, you can use it and pay the balance off in the first year to successfully avoid repaying anything extra. Be sure to spend only what you need and only what you can pay back quickly – if you have a balance left when your introductory time period is up, you’ll be stuck paying interest charges.
- File for bankruptcy. If you’re struggling to pay all your debts, filing for bankruptcy can offer both payday loan help and can get you out from under your other bills. Payday loans are usually considered non-priority, unsecure debts, so they likely can be discharged in a Chapter 7 bankruptcy. If you file for Chapter 13 bankruptcy, you can probably pay back your payday loan with a more affordable interest rate and time period.
Talk to A Cleveland Payday Loan Attorney
Payday loans can often be predatory – lenders will hand you cash with little or no regard for your ability to pay it back. They also charge such high fees and interest that you may find it impossible to keep up. The attorneys at Luftman, Heck & Associates work every day to stop the predatory practices of payday loan companies.