Payday Advance is the fastest way to borrow money because lenders use your paycheck as collateral to guarantee the repayment of your debt. However, what a payday lender will never say is that you will have to pay the highest interest rates for a sum of money that being relatively small, may increase in an immeasurable way when the payday comes. The AARP, Consumer Union and Consumer Action sponsored a legislation to protect California consumers making them aware of the high interest rates that a payday loan generates. However, you do not need to live on the West Coast to find that the same explanation they be provided on their Payday Loan Factsheet can be applied anywhere from coast to coast, just adjusting the huge interest rate accordingly.
High Interest Rate Examples
As one example published in such document, an individual who borrows between $100 and $300, will pay 212% for a one-month loan, which being too high interest rate, is the amount to pay at the lower end. Payday loans are often used to bridge the gap between the application date and the payday, which may happen in one or two weeks. Thus, the interest rate to pay for a one-week payday loan would be 911% and for a two-week payday loan, the borrower will “only” pay 456% interest rate. Now, add to these figures to the fact that borrowers cannot always pay back the debt at first, repeating the interest rate cycle for as many months as payment delays.
Hidden the extremely high interest rates that you have to pay back for a payday loan is just one of the many secrets that payday companies do not want you to know, but there are many other secrets that you must have to know. One is your lack of knowledge on how they operate when it comes to debt collection. Many payday companies belong to the CFSA, Consumer Finance Association (CFA), or Consumer Credit Trade Association (CCTA.) These organizations have strict codes of conduct that members have to adhere to, including the inability to keep adding interest rates and extra fees if you cannot pay back within the next four payday cycles.
Can I go to Jail?
Menacing you with jail is a threat that hides another secret they do not want to tell; there is no way they send you to jail if you cannot pay back a payday loan and accrued interests. Debt collectors will use this argument, but unless they can prove you are a fraudster with no intention to pay back since you applied for the loan, there is nothing they can do against you, but give an Extended Payment Plan if you ask for it.
Read the fine print
Yet another well-kept secret is that payday loans have a “fine print” to read. Facility to apply for a payday loan makes people forget about those hidden facts or catches that most companies include as fine print that, in this case, is usually posted somewhere on the company’s website. If you are unsure what the fine print says, ask for it before applying.
Last but not least, if payday companies or their debt collectors threaten you, know that The Fair Debt Collection Practices Act (FDCPA) makes illegal intimidating actions, so you can always denounce any irregularity coming from them.
Author Bio: Frank Smith is an associate at PaydayAdvance.org an informational payday loan content website.