Payday loans – an expensive option
In states that don’t regulate payday lending interest rates and fees, these supposedly short-term loans often have annual interest rates of more than 391 percent.
Additional fees associated with payday loans hike the costs up even more and weekly payments must be made or penalties are added.
If a consumer is unable to make a payment on a payday loan, they have the option of renewing the loan in order to postpone the payment. This starts the process over with a higher original loan amount, which means more interest on the debt.
Some consumers who are caught in the payday lending cycle take out payday loans to make payments on other payday loans, creating an endless cycle of debt that can quickly get out of control.