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Credit and Bankruptcy Law

Loans

What are payday loans?

Payday loans are high-interest, short-term loans in which the repayment period is generally conceived to arise on an individual’s work payday, thus inspiring the name “payday loans.” Unfortunately, payday loans are best known for the high interest rates charged on such loans. In payday loans, individuals promise to write a check in order to obtain immediate cash. For example, an individual agrees to write a $420 check in order to obtain $350. But, if the individual does not pay back the $420 in a timely fashion, then the interest rates often skyrocket and the individual falls further into spiraling debt. Many states have begun to regulate such payday loans. Some loans that often bear closer scrutiny are rent-to-own purchases, auto title loans, and income tax refund loans.



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