Residents in Wisconsin and most Americans in general always try to stick to their budget plans. However, there are instances when a person’s finances cannot cover all expenses until the next payday. Many people turn to payday loans or cash advances as a temporary debt relief in such a situation, but this relief option could create further problems down the line.
A payday loan is a short-term solution for unexpected expenses. It can be made by banks, stores or online. In order to avail a loan from payday lending, the borrower needs to write a check to the lender, which is payable within the next two weeks or so. However, payday loans often face scrutiny because many financial experts have dubbed them a debt trap.
According to sources, availing payday loans may trigger a cycle of debt for an individual because the loan should be paid in a short period of time and in full. There are instances when the borrower applies for another cash advance to pay off the first loan or roll over the loan to extend the time of payment. Extending the payday deadline may result in more charges and a higher interest rate, resulting in more personal debt for the borrower.
The accessibility of payday loans to people with an insufficient income is an advantage. However, using payday loans can lead to a financial disaster, particularly if the situation gets out of hand.
Fortunately, payday loans can be classified as an unsecured debt. Generally, unsecured debts, such as credit card debt, medical debt and payday loans can be discharged through Chapter 13 bankruptcy.
Chapter 13 bankruptcy, also called reorganization bankruptcy, may permit Wisconsin residents to organize their debts through manageable payments over a certain period of time. Filing for Chapter 13 bankruptcy can also reduce interest payments and stop creditor harassment.
Although it may take up to five years to settle the debt, declaring Chapter 13 bankruptcy may save them from the financial woes of payday loans. Those seeking to obtain relief from their debt should seek to understand their situation so that can appropriately choose their relief route.
Source: Usindexlive, “Is a payday loans right for you?”Alison Russell, Oct. 7, 2013