| If you're like many consumers, there's likely been at | | | | consequences. |
| least one time in your life when you needed to pay | | | | If you take out another payday loan, you'll have to |
| bills or buy essentials, but the money just wasn't | | | | pay another lending fee. Say your first payday loan |
| there. You might have considered taking out a | | | | was for $1,000 with a 25% fee. You've promised to |
| payday loan to cover your expenses, especially if | | | | pay back $1,000, but you only receive $750. If you |
| you didn't have access to funds from credit cards or | | | | take out another loan, you've lost another $250, and |
| savings. The consequences that come with taking | | | | now you've spent $500 to essentially borrow the |
| out a payday loan, however, can be quite profound. | | | | same $1,000. It's easy to see how that can put you |
| The concept of a payday loan is quite simple. You | | | | in real trouble - if you have to take out four |
| give a check to the payday lender for a small | | | | consecutive loans, you've lost the entire amount you |
| amount of money (typically between $500 and | | | | borrowed to fees, plus you still owe the $1,000 you |
| $1000), and the lender gives you the amount of the | | | | borrowed. |
| check in cash, minus a lending fee. After a certain | | | | If the check bounces things will get really bad. The |
| number of days (usually less than two weeks), the | | | | payday lender will charge you a returned check fee |
| lender deposits the check. | | | | on top of the loan amount and lender fees. If you |
| While this seems reasonable, it is very easy to run | | | | don't cover the debt quickly (within a week or less), |
| into problems with payday loans. First, the lending | | | | the lender may be able to sue you for double the |
| fees are quite high, sometimes as much as 25% of | | | | amount you owe - in some cases, even more. |
| the amount of the check. Paying a 25% charge to | | | | While taking out a payday loan can get you through |
| borrow money for a week or two can quickly eat | | | | a temporary financial crisis, it should be uses as a last |
| into your income. | | | | resort. Even if your setback is truly temporary, you'll |
| The second problem is even worse. If you can't | | | | still end up paying an exorbitant amount to borrow |
| cover the payday loan when it comes due, you'll | | | | the money. If your financial problems are longer term, |
| have to do one of two things: either take out | | | | the fees charged by payday lenders can put you in |
| another payday loan to cover the first one, or let the | | | | financial ruin. |
| check bounce. Both scenarios have serious financial | | | | |