Using bankruptcy to break the vicious cycle of payday loans

Using bankruptcy to break the vicious cycle of payday loans

Are you caught up in the vicious cycle of payday loans? You’re not alone. According to a report by Bankrate, twelve million Americans use payday loans annually. For most people struggling to meet their needs, payday loans become necessary to pay bills and support their families. Moreover, no credit is needed; you only need a job and a checking account.

Payday loans might seem like an excellent option to solve your financial problems. However, instead of helping you gain control of your finances, they make it more complicated to make timely bill payments due to the high-interest rates.

In addition, once the cycle begins, it can be hard to break because lenders will take their money directly from your checking account.

How payday loans work

Cash advances or payday loans are short-term, high-interest unsecured loans. The lender extends the high-interest loan based on your income and involves a large portion of your next salary.

Payday loan lenders require you to show some proof of income, like your employer’s pay stubs. They will then lend you a part of your salary, which must be paid back quickly. Unfortunately, this will leave you with little money to cover your bills, and you will end up borrowing again, ending up in a vicious cycle.

Filing for bankruptcy can help break this cycle

If you find yourself borrowing a payday loan to pay off another payday loan, you are in a financial problem. Fortunately, filing for bankruptcy can be an excellent solution. After you file for bankruptcy, all the automatic withdrawals by the lender will stop.

Moreover, any amount you owe the lender, past due utility bills, prior leases and rent can be discharged in bankruptcy.

If you have unsecured payday loans that you struggle to pay, you may consider filing for bankruptcy. Filing for bankruptcy can help you get a new start.

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Amer Mustafa

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