Payday Loan and Bankruptcy
Payday loans remain to be your immediate savior in times of emergency financial trouble to make ends meet. You resort to it despite the high interest rate to be able to pay your bills and/or put food on the table for you and your family . You aim for immediate relief, and definitely payday loans serve the purpose. But can they still be beneficial in the long run?
What are Payday Loans?
Payday loans are immediate, short-term, high-interest charging loans that are typically based on how much you earn. What happens is that when you repay this loan, it normally eats up a large portion of your paycheck. Despite its downside you still succumb to taking advantage of it in resolving financial issues that arise in between pay days. Sometimes, before you know it, you fall for its trap, financially tangled in payments, and drowning in interests.
How Does Payday Loans Work?
As this type of loan does not require much requirements from you, you can easily get approved and loaned the money as long as you show the lender your proof of income or your pay slips. From there, the lender will determine how much money to lend you with interest. You are then obligated to repay the loan in 30 days or less.
Your pay stubs or pay slips are the only proof of income you need to submit, which are not enough proof for lenders to check your creditworthiness and capacity to pay. As lenders’ way of securing their money back, they collect a high interest and a shorter repayment schedule.
Payday Loan is an Unsecured Loan
Payday loans are mostly unsecured loans in which you do not need to have a collateral for you to be able to borrow money. It works in a way where you authorize the lender to get your money from your bank, prepaid account, or credit union. It may also work where you issue the lender a check for the repayment amount which he/she will cash when the loaned amount is due.
Do Payday Loans Affect My Credit Score?
As your payday loan record stays on your credit record for 6-10 years when reported to a collection agency because of issues with payments, it is a must that you pay your payday loans due on time. Once your payday loan gets to be submitted to a collection agency because of payment problems, then expect that it will definitely affect your credit score.
Payday Loans and Bankruptcy
Payday loans are attractive since they do not require a lot of documentation from the part of the borrower – having a bank account, credit union, or debit account, or writing checks will normally do the trick of getting you approved for the loan.
Convenient as this may seem, since you can easily borrow money, you unknowingly fall prey to it and you find yourself in a tangle of payday loans dues and could not keep up with them. And this poses a really big problem.
One option for you if you have issues paying back payday loans is refinancing. This means that the lender may allow you to refinance or extend your loan. However, this comes at a price. Most lenders charge high refinance fees that may add up to the interest of your loan, drowning you in debt all the more instead of giving you the relief you seek.
Another feasible way is to file a Chapter 7 bankruptcy which wipes out your payday loan. This bankruptcy chapter has the automatic stay feature that prevents payday loan lenders and other companies from collecting from you. With the payday loan discharged, you can get rid of your debts without losing any of your property.
Is Chapter 7 Bankruptcy the Best Option for Your Payday Loans?
There is much more you need to understand should you consider Chapter 7 bankruptcy to be the ultimate solution for your payday loans. There are a lot of things that you need to pay attention to before you can finally say you can be absolved from your lenders.
Freedom Law is Here to Help
If you are unsure which option to choose on how to get debt relief from your lenders and other creditors, it would be best to consult with bankruptcy attorneys. They can sit down with you, discuss your current payday loans repayment situation, and present to you the best option there is, and if Chapter 7 filing is for you.
Freedom Law is ready to help. Please request a call-back by submitting a short online form. All initial consultations are free and confidential.