Most people who find themselves sitting in a payday loan store have already exhausted every other potential source of financial help. Payday loans are never a first choice, and like bankruptcy, it often signals desperation. Not everyone puts money aside for that rainy day when you are in danger of losing your job because your car needs to be repaired, or you need medical care for a family member. Payday loans are not good loans (they often have punishing interest rates), but they are an option when you have nowhere else to turn. Read on to learn more about these loans and what you might be in for if you fail to pay them back.
How Payday Loans Work
These loans are fairly easy to get, as long as you can show proof that you are employed. A pay stub or statement is usually all that is needed, and after signing some papers you are on your way with the funds you need to take care of your emergency. Before you can leave the loan store, however, you must fill out a check and leave it with the lender. The check is dated to correspond with your next payday, and is thus considered a post-dated check. While you may have heard that such checks are illegal and that you could get in trouble for writing one, it is only illegal if you wrote the check knowing that you would not be able to make good on it.
The Punitive Interest Rate
Since you are in such a desperate situation, you may not have paid a lot of attention to the interest rate you are being charged for the payday loan, but you can rest assured it is likely very high. For example, if you take out a loan for $900.00 on April 15th, with the loan being due on May 1st, the amount you may end up paying is about $990.00. While this may not seem too bad, you should consider the consequences of not being able to pay that loan back on the agreed date, which will mean skyrocketing interest. Be sure to read the fine print that details how the payday loan store proceeds when you cannot make that initial payment.
Threats of Arrest
In some cases, the payday loan store actually threatens you with arrest if you fail to pay the loan off as agreed. They allege that you will be arrested and jailed for "passing a bad check", since they cannot use the check you left with them due to no funds available. This is incorrect, you can only be charged with passing worthless checks if you wrote that check with the intention to defraud, and it's likely that you had every intention of paying your debt. When you receive money from a payday loan store, you have no choice but to leave the post-dated check.
If you have been arrested and charged with passing worthless checks because of the payday loan store's post-dated check requirement, contact a criminal defense attorney immediately to help you fight this charge. Visit a site like http://www.gdamianilaw.com for more legal information.