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Can Debt Consolidation Make My Financial Position Worse?
Debt consolidation is one of the best ways of reducing debt. Your monthly payments become much lower and this will give you more disposable income. Unfortunately, debt consolidation can also make your position much worse. The reason debt...
Debt Free: Sound Like a Far-Off Dream?
What is it you wanted to get from being debt free? Peace?
Being debt free is truly possible. The hard part is changing our habits. There are many agencies, courses and books available both online and locally to help you to reach your goal of...
Three Keys For Getting Out Of Debt
Getting out of debt gives you a euphoric feeling, positively liberating. It's a feeling you want with all your heart. The good news is, with the three principles outlined in this article, you can turn yourself in the direction of financial...
What is a Debt Consolidaton Loan?
A Debt consolidation loan could be the solution if your objective is to reduce interest rates and lower your monthly payments, avoid bankruptcy, consolidate your bills and have one monthly payment, or simply get out of debt the fastest way...
You And Your Debt Against The World.
Anyone who embarks on a debt reduction program should know the rules for success. There are two. You need to stop adding to your debt. You need to find extra money to pay it off quickly. You need to know the playing field is not level. The...
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Debt Consolidation – Watch out for Payday Loans
Most any large city has a number of small shops offering payday loans. They’re often found in strip centers; sometimes they double as pawn shops. They have a simple business – they lend you money until your next paycheck. The system is pretty convenient; you write them a postdated check for the amount you’re borrowing plus interest. On your next payday, they cash the check and your loan is paid off. What many people who use payday loan services fail to realize is that the interest rates charged by these firms are substantial, often reaching the equivalent of four hundred percent per year!
The interest rates charged by payday loan stores varies from state to state, but a rate of 15-17% for two weeks is not unusual. This translates to 390-440% per year, which is a staggering amount of interest to pay on a loan. The lenders say that these amounts are fair, and are necessary to cover the overhead associated with running a business and to account for a substantial number of borrowers who fail to repay the loans. That may be true, but that high of an interest rate can turn the “convenience” of a payday loan into a nightmare. Many borrowers are relatively low paid blue-collar workers who live from paycheck to paycheck. Someone who is a “bit short” this week may also find themselves short again on their next payday. If
they fail to pay back the payday loan, the interest continues to accrue and additional penalties, such as returned check fees, may apply. It is quite common to see loans of $300 or so turn into debts of several thousand dollars, especially if the borrower compounds the problem by borrowing funds from a second payday loan store to pay the loan from the first one.
Several states have already passed laws capping the interest rates that may be charged on payday loans. Others will undoubtedly follow. A good alternative to the payday loan would be to take a cash advance on a credit card. There is usually a fee associated with a cash advance, but the annual interest rate, combined with the fee, is still a lot cheaper than a loan at 400%. Anyone who is considering taking out a payday loan should read the terms carefully. Otherwise, that “loan until payday” could be there to haunt you for a long time.
About the Author
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to debt consolidation and credit counseling, and StructuredSettlementHelp.com, a site devoted to information regarding structured settlements.
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| Advertisements Promising Debt Relief May Be Offering Bankruptcy |
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