Payday Loan Debt
By law, payday loan lenders are required to disclose the Annual Percentage Rate (APR) for the consumer loans they offer. APR refers to the interest rate charged over the course of a year, and is calculated by multiplying the rate for a payment period, by the number of payment periods in a year, then dividing by the principal balance. These are usually presented by a Truth in Lending Disclosure. Most payday loan companies require you on average to pay $15-30 more when you pay them back in a week or two. While that doesn’t seem so bad at first, glance, if you do not make the payment timely, the $15 interest on a $100 one-week loan is a whopping 780% APR! ($15 interest for one week x 52 weeks=780/100=7.80=780%.)
These terms and details are usually hidden or buried deep in the terms. Most payday loan companies aren’t quick to offer consumers this information and are also frequent violators of advertising regulations. When your payments are due, payday loan companies are quick to offer that you renew or extend your loan. This sounds great but what they don’t tell you is that by doing so you will incur additional fees and associated interest, and fall deeper into a vicious debt cycle. For this and many other reasons, the Federal Trade Commission advises consumers to be cautious of payday loans.
Some lenders have violated state law. There are 13 states that outlaw payday lending entirely, and others have regulations such as usury laws in place which restrict the maximum APR that any lender can charge. And in October 2007, a federal law was passed that caps lending to military personnel at 36% APR however payday lenders frequently ignore usury limits and continue to charge higher interest rates. Consequently, payday loans have a default rate of 10-20%.
Why are Payday Loans Popular ?
Despite the inherent risks associated with payday loans, California consumers continue to take them out for a variety of reasons. Number one, they are easy to get approved, as they are secured against a customer’s next paycheck and don’t require a full credit check as most other loans do which find the most common users of payday loans the so-called “high risk” borrowers, or typically low-income people who are otherwise unable to secure lower-interest-rate credit. In addition the fact that they are short-term for small amounts leads people to believe that they aren’t taking on any debt that they can’t immediately pay back.
You Can Settle Payday Loan Debt
As with any other debt settlement program, the first step in payday loan debt settlement is figuring out how much you actually owe from the payday lender. Too begin negotiations with your payday loan lender our attorneys are skilled at negotiating for large reductions in your payday loan debt. Our attorneys can also settle any of your other debts such as credit card debt, medical bills, auto loans, or mortgage debt. . Contact one of our experienced California debt lawyers today for a free evaluation and consultation with a lawyer in one of our many California offices.