Reno, NV – Recently, it was asked, “What should I do, I have 9 payday loans totaling $5,600 and I can’t pay them anymore.”
Payday loans are usually loans between $200-$1,500, short-term, with extremely high interest rates. In Las Vegas, interest rates on payday loans are commonly between 250% to 600% per year. Unlike some other states, Nevada does not cap the interest rate that lenders may charge.
Loans are usually due in two weeks. The Borrower may elect to pay just the interest and roll the loan into a “new” loan. Rolling over the loan keeps the borrower in a constant state of debt until it is paid in full.
How Do I Consolidate or Modify My Debt/Loans?
Most borrowers elect the rollover option since the borrower usually cannot pay the loan in full. At this point, a significant portion of the borrower’s income is used to simply pay the interest.
On the above example, the borrower has $5,600 spread over 9 payday loans. The monthly payment would be approximately $1,400 per month with interest at 300% per year. Such an interest rate is standard.
The danger is that the borrower has 9 loans. Since the amount loaned is based on income, the debt is probably 9 times the amount that he can handle. My guess is that some of the payday loans were taken to service the previous loans.
At this point, Bankruptcy may be the only realistic option. A successful Bankruptcy claim will eliminate the debt of the payday loan, and immediately upon filing the Bankruptcy, the lender’s collection activities must stop pursuant to court order.