Payday loans are banned in 11 states. This should make borrowers stop and think about the reason behind this fact. However, the fact that it is flourishing in 39 other states clearly paints the picture that this does not stop consumers from seeking the seemingly harmless, short-term payday loans. But this loan is anything but harmless and quickly starts a snowball effect that turns into a vicious cycle.
A payday loan is typically obtained by the consumer providing the lender a postdated check. This check will be cashed in a predetermined time frame, typically being between two and four weeks. There is no credit check, simply a verification of income with pay stubs or Social Security payments. However, the fact is that when payment time rolls around, consumers are unable to make the payment. This leads to extension on payday loans, or even worse seeking a loan from another lender to pay a previous obligation. As a result, the outstanding loans accumulate interest and fees that eventually lead to debt that is too big for anyone to handle.
The fact is that when you breakdown the numbers, consumers are paying up to 520 percent on their original loan. While this may not seem factual, it is based on current rates in New Mexico, where payday loans are a continuous political issue. The businesses providing these services have been compared to sharks, preying on the lower and middle class who are desperate for emergency funds. Be Free Financial can help you gain freedom from this snowball effect and finally break loose of the vicious payday loan cycle.