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Payday loans may lead to personal bankruptcy
STILLWATER, Okla. – During hard economic times many consumers may run out of money before the next payday. When this happens some people turn to payday loans.
Eileen St. Pierre, Oklahoma State University Cooperative Extension personal finance specialist, said a payday loan is a small, short-term loan used to cover a borrower’s expenses until his or her next payday.
“Payday loans are normally due every week or every other week,” St. Pierre said. “With these loans borrowers get into financial trouble and it usually seems other debts like credit cards or mortgages tend to be ignored.”
Research found payday loan applicants who received the quick cash after their first application were significantly more likely to file for Chapter 13 bankruptcy than those whose initial application was denied.
Furthermore, research indicated payday loans coupled with interest payments may be sufficient to tip the balance into bankruptcy for a population that is already severely financially stressed.
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