As is the case with many short-term and easy-to-acquire loans, the interest rates on payday loans can be astronomical.  Payday loans are loans that amount to $500 or less.  As such, when obtaining a loan for this small amount, there is typically a significant cost associated with it, as such loans are issued frequently and there is a large amount of risk payday lenders are taking on.  In Missouri, the interest rate for payday loans is capped at 75%, and this applies to both the interest itself and any other fees associated with the payday loan.  Some states have smaller caps, but states with no caps on the interest rate at all are essentially allowing payday lenders to apply annual interest rates that amount to 200% or even 500% in some cases to the principal amount of your loan.  The total amount you owe could turn out to be more than double of what the original loan amount was.

Further, you will likely not be informed of this information, because when obtaining a payday loan, the interest you hear about may be explained in terms of daily interest, so the percentage may not sound as high as it actually is, especially when most interest rates on credit cards and loans are explained in terms of the annual percentage rate (APR), not daily or even monthly interest rates.  So it is a common mistake to believe that the interest rate on your payday loan is explained to you in terms of the annual percentage rate.

Why are Payday Loans a Cause for Concern?

While the amount a consumer can obtain through a payday loan is no more than $500, and the borrower may have the funds to repay this obligation (in addition to interest and other costs), the fact of the matter is that many consumers are repeat payday loan borrowers.  When you are in need of cash quickly, a payday loan may be your best option, however, it should not become a pattern of practice to help you and your loved ones make ends meet.  After having multiple payday loans, you will find that the amount you have spent on interest washes away many of the benefits of the loan.  It is difficult to determine just how much a payday loan is costing you unless you can look at each individual payday loan and add up the interest you have paid for any given year.

Payday loans often trap repeat borrowers simply because such borrowers begin to rely on the payday loans in order to pay life’s daily expenses.  Instead of resorting to payday loans, you have other options for managing your finances that will limit the amount of debt you owe, and help you learn to live without the need to obtain a payday loan in the future.  For example, if you are able to adjust your due dates on monthly bills (such as utilities and credit cards), then this may make it easier for you to make those payments after you receive your paycheck, as opposed to obtaining a pay day loan while you are waiting for your next paycheck, just to pay those monthly bills.  To have a better understanding of what your options are, you should consider speaking with a Kansas City Debt Relief and Bankruptcy Attorney to discuss your financial situation.

Contact Kansas City Bankruptcy Attorney Douglas Breyfogle to Schedule a Free Consultation

Payday loans give you the cash you need today, but make you pay back the balance in very little time at a significant cost.  While a payday loan may be a way to get cash quickly in an emergency situation, many consumers use payday loans as a way to make ends meet, falling into the trap of never-ending debt.  If you are facing payday loan debt or any other debt, you should consult with a Kansas City Bankruptcy and Debt-Relief Attorney right away to discuss your options.  Douglas Breyfogle is a Kansas City Bankruptcy and Debt-Relief Attorney who focuses his entire practice on helping consumers like you face debt and eliminate it in the most feasible way possible.  Douglas Breyfogle has more than twenty years of experience providing his clients with excellent legal representation, and he is able to provide each client with an individualized plan to tackle debt head on.  To speak with Douglas Breyfogle about your financial situation, contact our office today by calling (913) 742-8700 to schedule a free confidential consultation.