If you are having a tough time right now, you are not alone. At this time of year, many are realizing they overspent on their vacations, a medical or car repair bill has set them back, or they are a little short for what they need to get those back-to-school supplies for their kids. When money is tight, it is easy to make rash decisions.

Once the credit cards are maxed out, you may think your options are limited. There is a quick and easy option in a payday loan. However, what may seem like the answer to your problem may actually create an even greater problem.

How does it work?

There is no shortage of payday loan options in Milwaukee. In fact, you only need to drive a block or two before you pass another storefront offering cash now. Wisconsin is one of the few states in which payday loans remain legal, and there is little regulation over them. This may seem like a good thing, but for many, such easy access to credit is a dangerous situation.

Some important facts to know about payday loans include the following:

  • Payday loans are short-term, typically between one and two weeks.
  • You will provide proof of employment and access to your bank account.
  • You will give the lender either a post-dated check or permission to debit your account on your next payday.
  • The lender will deposit the money into your account.
  • On the date the loan comes due, the lender will cash your check or withdraw the money from your account, plus the fees and interest.

The fees and interest on a payday loan can be outrageous. In Wisconsin, there is no legal limit to the rate a lender can charge. In some cases, you may be paying close to 400 percent annual percentage rate.

What if I can’t pay?

If your finances are no better on the due date than when you took out the loan, you may have to extend the loan. Payday lenders are happy to do this because they can continue to charge you for the original loan and add new charges for the extension. Additionally, if you authorize the lender to debit your checking account, he or she may do so even if there are insufficient funds, resulting in hundreds of dollars in bank fees especially if the lender attempts to collect numerous times.

Instead of a payday loan to tide you over, you may wish to explore options that will bring a true solution to your financial troubles. If you find yourself more often needing cash to tide you over, your finances may be worse off than you realize. You may find it helpful to discuss the matter with a legal advisor who can offer sound advice for seeking a long-term resolution.