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Fees Paid for Payday Loans Could be higher than Original Loan

Seeking debt relief from payday loans can be a difficult process.  Payday loans are a form of debt which are often known as cash advances or check loans. They carry a fee between $10 and $20 per $100 borrowed, and must be paid back within a set amount of time (typically 14 days). The problem with this sort of loan is that many borrowers are unable to pay off the first loan, causing them to roll the debt over and take out a larger loan to pay off this existing debt. According to the Consumer Financial Protection Bureau, more than 80% of all payday loans are renewed or rolled over within the two week period.

Over 60% of these loans are made to borrowers who take out at least seven loans in a row. This is the point at which the fees paid exceed the original loan amount. Although many payday borrowers are able to pay back the money within the first period, taking out a payday loan could easily turn into a continuously growing cycle of debt if one is unaware of the fees attached. Making sure one has a plan to repay the cash advance prior to taking a payday loan out is a good way to avoid falling into this cycle.

If one has already fallen into this cycle of debt and are seeking debt relief, they may want to consider speaking with an experienced bankruptcy attorney in order to better understand their options.

Works Cited

Hicken, Melanie. "Payday Loans: Borrowers Pay More in Fees than Original Loan Was worth." CNNMoney. Cable News Network, 25 Mar. 2014. Web. 02 Apr. 2014.

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