Good people can have bad things happen to them, and it is understandable why desperation can lead some individuals to take on risky loans. Perhaps you recently lost your job and need a quick loan to make a payment on your car, or to put food on the table so you can feed your family. Unfortunately, some businesses may try to take advantage of your situation by offering short-term payday loans and long-term installment loans with ultra-high interest rates.
Payday lenders offer short-term loans that can total $1,000 or more, but at interest rates so high, borrowers must continue taking out new loans to make payments on existing ones. Unsuspecting people can find themselves trapped and unable to make payments on other debt obligations.
To avoid public scrutiny for predatory short-term loans, payday lenders have reinvented themselves, and now offer installment loans. Installment loans allow borrowers to pay across a period of at least 120 days instead of two weeks, but at extremely high interest rates that can still trap borrowers in a debt cycle.
Installment loans can have interest rates as high as 300 percent, making them far more expensive than other forms of debt. To put this into perspective, the average national interest rate on credit cards is 15 percent.
Should I File Chapter 13 Bankruptcy to Get Rid of Payday Loans?
Payday loans are very risky because high interest rates can cause the loan balance to grow exponentially, making other debt obligations such as car loans, mortgages and student loans go into default.
By filing Chapter 13 bankruptcy, you can have a chance to restructure your debts, escape wage garnishment and pay your remaining creditors under the protection of the bankruptcy court. For borrowers suffocated by unaffordable monthly payments, wage garnishment and debt collection harassment, a Chapter 13 bankruptcy can give them a breath of fresh air.
As attorneys who have spent their careers helping individuals and businesses file for bankruptcy, The Sader Law Firm has decades of experience helping people hit the reset button on their finances.
The Sader Law Firm -- Bankruptcy Attorneys Serving Kansas and Missouri