There are a few questions that bug me and what is a payday loan trap is one of them.
It has been my experience that most people when asking this question are already deeply caught in the trap and are really asking how do I get out of the payday loan trap?
They already know what the trap is all too well.
We here at Help With Payday Loan Debt feel the need for an article describing all aspects of these horrible traps and what a person can do to get out of them along with how to avoid them in the future.
So many people here in the United States are deeply in debt with these things and if they would have known how to avoid them they never would have ventured into this area of debt.
Are you trapped?
Identifying The Trap
Let’s start with what exactly is a payday loan trap.
First, we need to understand there is a huge difference between what a payday loan trap is and how it works.
Its workings are actually how the trap is created and this gets a bit technical in the explanation, but I will explain it as simply as possible.
What we call the trap is when you are buried in unmanageable payday loan debt.
You missed usually more than one of your payments, you are now what they call in default of one or more payday loans and the interest is piling up daily.
You are getting harassing and threatening phone calls at work and at home, your boss is getting them along with your family members and your references you used on your loan application.
Legal action may be threatened and the loan officers will not take no for an answer.
We have had clients who were getting up to 20 calls a day non-stop.
On a side note this is also the point in time that your checking account is banged so hard you are to the point of closing it or at least freezing it, but this usually tends to be almost impossible to freeze the payday loan companies out because they will just change the name of the company on their requests.
Oh yes, they do this all the time, especially with online companies.
Now the above may sound like it is the worst case scenario but actually, it can get much worse.Many start pawning everything they own, using any money they can find including selling their possessions and by now they have even considered bankruptcy.
That, in a nutshell, is the payday loan trap.
Now let’s take a look at how it happens and how fast it happens
When a person takes out a payday loan without knowing how they work they are sitting ducks.
These loans are set up for failure and a person needs to understand that if things go wrong even a little bit the trap is in motion.
“The only way to ever take out a payday loan safely is if you are absolutely certain you can pay the loan off in full on the first due date period! ”
This must be followed to the letter and you will never have to worry about getting caught in a payday loan trap.
Just knowing this simple fact can spare people from any of the above agony.
It is that simple, but rarely does anything ever play out being that simple. 🙂
The quickest way to end up in the trap is to keep rolling over your payday loan.
This means you pay only the outstanding interest fee plus usually a roll over or counter fee.
A $500.00 loan can soon become a $5000.00 loan in no time due to the roll over fees and huge interest payments. Remember, when you roll over a payday loan you still get charged the interest, and most $500.00 loans cost $150.00 in interest and anywhere from $15.00 to $50.00 in rollover fees.
When you are done rolling it over you will still have the original balance of what you borrowed plus a new interest charge so your new balance two weeks from the rollover date is still $650.00
Yes, these companies are greedy for sure!
So, your payback on a $500.00 loan for two weeks due on the first due date, ( remember if you paid this off in full on this due date everything from this point on would not happen) was $650.00, but by rolling it over you paid the interest and roll over fees, and say that fee was $50.00 you now have a balance of $650.00 due and you have paid $200.00.
At this rate, this loan is growing as fast as the national debt!
Now, add an emergency into the mix on your next due date and you are broke so you take out another payday loan to cover the costs of rolling over the first payday loan again and you can see how this can just blow out of proportion in no time.
Welcome to the payday loan trap!
Online payday loan companies are worse than the above scenario as they only take out the interest every due date unless informed otherwise so if you are not on top of those loans you will be slaughtered in interest payments while never lowering the original balance one bit.
In order to avoid any of the above just make sure you can pay off your payday loan in full on the first due date period!
If something comes up unexpectedly find the money to pay this off!
Do not take out multiple payday loans and do not roll over payday loans for any reason.
If you are in trouble with payday loan debt go ahead and fill out our form or give us a call toll-free at 1.877.280.5100 and we can show you how we can help you with a free no-obligation quote.
You can also check out our Payday Loan Repayment Plan for more information!
We help restore sanity!
I hope this article helps you in dealing with payday loans safely!