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Payday loan traps use your anxiety as bait

To say that payday loans are a trap may be an understatement, in the opinion of many financial counselors. The payday loan industry entices borrowers who are desperate or don't have the time or resources to investigate other ways to solve their financial crises. Perhaps you were in that situation when you took out your payday loan.

These short-term lenders offer you small loans, usually less than $500, for a short amount of time, typically two weeks. You often get the money you need within minutes. While it sounded easy, the terms and consequences of default may not have been clear to you.

The snare is set

Payday lenders require very little for you to qualify for one of their loans. If you have steady income, identification and a checking account, you will probably get the loan. Lenders care about their ability to collect the money, not necessarily your ability to pay. Here is how a payday loan typically works:


  • You request money from a payday lender, and the lender verifies your employment and bank account information. There is no credit check.
  • You write a post-dated check for the amount you are borrowing plus the fees and finance charges. In Ohio, this is about 28 percent, but in some states, payday lenders can charge an APR as high as 780 percent.
  • Instead of writing a check, you may authorize the lender to withdraw the money from your checking account on the due date.
  • On the date the loan is due, you must pay the entire balance plus all charges in full. The lender will deposit the check or withdraw the funds from your account.


The simplicity and ease with which you can obtain money may lure you back again and again, but payday loans have many drawbacks. For example, if you can't pay on the due date, your bank may assess an overdraft fee when the lender attempts to withdraw the money. Of course, this is in addition to the fees the lender will assess. The lender may try multiple times to collect the money, each time resulting in another fee. Payday lenders are also quick to act if you default on a loan.

Getting free from the trap

Ohio holds its payday loan operators to stricter rules than some other states. For example, you may rollover your loan in other states, but Ohio law forbids it. Nevertheless, many lenders have found ways around the high standards the state has set. If you are caught in the trap of payday loans, it may be time for you to seek professional advice.

The situation that caused you to seek the temporary help of a payday loan has probably not improved. In fact, your debts may be even more burdensome. Consulting with an attorney will provide you with answers about your options for debt relief. Bankruptcy may eliminate your unsecured debt, including those payday loans.

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