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Payday Loans: How much do they really cost?

When I first started as a bankruptcy lawyer in Waco, Temple, Killeen, and the surrounding areas, I would rarely see a payday loan. However, as the economy continues to decline, more and more clients are taking out payday loans as an attempt to supplement their income. They will take out a loan to cover an expense and then renew or take out more loans to pay back the original loan and the cycle begins. Before taking out a payday loan you need to consider the following facts.

  • Out of every 10 people who take out a new payday loan, 4 (or almost half) will renew the loan 5 or more times before repaying it according to the Official State of Texas Notice. Only 2 and a half people will pay back the loan in time. Don't you think every one of those 10 people said I will pay it back on time? But only around a fifth do.
  • If you take out a loan for $750.00 and take one month to pay it back, you will have to pay back approximately $1,205.70. If it takes you three months (which the last statistic stated almost half of you will take 5 or more renewals), that $750.00 loan will cost you approximately $2,117.10.
  • Payday loans may be one of the most expensive borrowing options available to you. Payday loans may change between 450% to 700% in interest. That is compared to a pawn loan which is typically 180% interest rate and a credit card which is a typically a 16% interest rate on average.
  • Payday loans will typically draft money out of your bank account causing you to not have enough money to pay your house payment, car payment, or utilities.

Before you take out a payday loan, you need to ask yourself the following questions:

  • Is it necessary for me to borrow the money?
  • Can I afford to pay this loan back in full in two weeks?
  • Will I be able to pay my regular bills and repay this loan?
  • Can I afford the extra charges, interest, and fees that may be applied if I miss or fail to make a payment?
  • Have I explored other options?

Before you take out a payday loan, make sure you understand the true cost of the loan. Free apps for the iPhone like Loan Shark can help you quickly and easily figure out the true costs of a loan. If you are ready to break the cycle of payday loans and regain control over your finances, we may be able to help! Call today at 254-633-2876 or email me at info@thekehllawfirm.com for a FREE, no-obligation consultation. Let my family help yours. Photo Credit: rinkjustice

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