Middle class people rarely hear about payday lending. Until recently, these loans were principally a danger to the working poor. Now, payday lenders are setting up shop in the suburbs and on college campuses.
Rightly used, they fill a niche that banking institutions dont. But they also produce a treadmill of debt thats a one way walk to bankruptcy. Payday loans are for people with jobs and checking accounts who suddenly need fast cash.
Typically, lenders provide $200 to $500 at any one time. The loans are granted for periods as short as one or two weeks, at fees of $15 to as much as $30. This translates into superhigh interest rates. Annual interest rates exceeding 2000% have been documented according to the Consumer Federation of America. If you cant pay, youre often threatened with criminal prosecution for passing a bad check.
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