Short-term borrowing is fine when you have the means to pay the loan back in time to avoid late penalties. Unfortunately, many Milwaukee residents with financial troubles grasp for temporary money solutions without considering long-term consequences. One little loan can devastate finances when Band-Aid solutions are used to treat gaping debt wounds.
Debt repayment plans for payday loans coincide with paycheck cycles. You take out a loan today and have to pay the money back within 14 days. Most Wisconsin residents who don’t have the funds to meet their bills today are in no better shape two weeks from now, unless they do something other than accumulate loans.
The Consumer Financial Protection Bureau reported, despite borrowers’ good intentions, only 15 percent of consumers who use payday loans pay them off in time. That means 85 percent of payday loan borrowers owe extra penalties on top of high interest. Plus, defaulting on a loan — even a little one for just a few hundred dollars — damages a credit score.
In many cases, borrowers who can’t pay off short-term loans in time are in over their heads and eventually just give up trying. The lender then sells the debt to a collection agency. The phone calls begin, and the consumer’s credit rating drops.
Borrowing money is always easier than paying it back. Payday loan companies make getting money as easy as possible, which attracts people who believe their financial situation is better than it often really is. After all, a few hundred dollars of debt isn’t that much, right?
The payday loan represents the amount of debt you can’t pay on a regular basis; short-term loans don’t fix that and often just add to problems. Credit counseling can help you re-budget and negotiate with creditors to adjust payback terms. When the debt is overwhelming, it may be time to talk with a bankruptcy attorney.
Source: Credit.com, “4 Ways Peeps Are Like Payday Loans” Gerri Detweiler, Apr. 18, 2014