For a significant percentage of Americans, budgeting is necessary to ensure there's enough money left over after payday to pay the mortgage or rent and buy food and other necessities. According to Bankrate.com, approximately 62 percent of Americans live paycheck to paycheck. This makes sticking to one's budget very important and also can spell major financial trouble in cases where an individual must come up with hundreds or thousands of dollars to pay for emergency medical, home or car repairs.
Many Americans, who encounter unexpected expenses, rely upon credit cards to cover related costs. Even regular credit cards typically carry double-digit interest rates and some Americans, who may be unable to secure a credit card, may be forced to rely on high-interest loans known as payday loans.
With interest rates soaring to around 400 percent, payday loans trap many borrowers in an endless cycle of debt. Unable to repay an original loan, borrowers are often forced to take out additional loans and then, when a borrower isn’t able to repay a loan within the allotted timeframe, payday lenders can garnish a borrower’s bank account.
In an attempt to reign in what many deem the unethical practices currently being exercised by many payday lenders, President Obama recently announced impending regulatory measures. While specific details of any forthcoming regulations haven't been finalized, the Consumer Financial Protection Bureau has been tasked with figuring out how to better protect consumers from so-called predatory lenders.
New York City residents who are struggling with debt problems may be forced to rely on credit cards or payday loans as a means to cover expenses. For these individuals, high interest rates and late fees may balloon, quickly making debt unmanageable. When facing this type of situation, it's wise to seek the advice and assistance of a bankruptcy attorney.
Source: NPR.org, "Payday Loans — And Endless Cycles Of Debt — Targeted By Federal Watchdog,"Scott Horsley, March 26, 2015