Due to health care costs, job loss and rough economic conditions, struggling with debt seems common nowadays. However, those three factors are not the only reasons why many people, including those in Appleton, Wisconsin, are facing financial challenges. Some debtors accumulate overwhelming debts due to payday loans.
For that reason, it may be important to remind Wisconsin readers about the dangers of payday loans. According to a report released by the Milken Institute, 12 million people in the United States borrow almost $50 billion a year by means of payday loans. Such a figure may not seem surprising because payday loans have become a form of debt relief for those who might need a few hundred dollars for their household expenses.
Unfortunately, the rates charged by payday lenders can be 80 times higher than mortgage and auto loans. In Wisconsin, the annual percentage rate on payday loans can be as high as 574 percent, which is double the difference between the actual loan and the supposed payment.
With the high interest rates and short-term loan conditions, many borrowers cannot afford to pay their first loan in full, forcing them to take a second loan to cover the interest. The accessibility of payday lending to those who are in need of fast cash seems to be advantageous. Unfortunately, it may also trap many people in a cycle of debt.
In cases of overwhelming debt and creditor harassment due to payday loans, a Wisconsin resident may find relief from Chapter 7 bankruptcy. Liquidation bankruptcy, or Chapter 7 bankruptcy may help a debtor to achieve a fresh financial start. Although Chapter 7 involves liquidation, there are options available that may allow a debtor to protect his or her assets and eliminate debts.
Source: Business Insider, “6 Outrageous facts that show how payday lenders screw consumers,” Hayley Peterson, Oct. 25, 2013