Payday loan companies offer a way to get money fast for those usually in tricky financial situations. The catch is that annual percentage rates can be extremely high, meaning borrowers end up paying far more than the original loan amount in the long run. Utah has some of the highest rates nationally, and a report from ProPublica is showing how some borrowers that fail to make payments are ending up in jail.
From September 2017 to September 2018 more than 3,000 people were served arrest warrants arising from an unpaid loan, according to a new report on payday loans by the Consumer Federation of America.
How This is Happening
Imprisonment for debt has been banned by congress since 1833, so how are companies getting away with this?
Each year, 12 million Americans use short-term, high-interest rate payday loans. Nearly three-quarters of the borrowers have a household income below $40,000, and almost 10% are retired. Interest rates on storefront payday loans are, on average, almost 400%. Many people find themselves in debt-traps, borrowing payday loan after payday loan, and forced to skip basic living expenses such as rent or health care to keep up with the payments.
Borrowers often fall behind on payments, and lenders then sue them in small-claims court. Some companies, particularly Loans for Less, have obtained warrants against those they’re suing for nonpayments of loans. Many of these borrowers cannot afford to show up in court again and again. If they miss a hearing, they can be held in contempt of court. So technically, these borrowers are being arrested for failing to show up to a court hearing. Most of these lawsuits are over small loan amounts. Researchers found that the median high-cost lender sued their customer in Utah for a $994 debt.
This isn’t something that’s only happening in Utah. Arrest warrants over debts are likely being issued in other states, just not to the same extent. Contempt of court rules are widespread across the country, so it’s important to keep yourself safe and consider alternatives to payday loans.
Payday Loan Alternatives with TLC
There are many dangers when it comes to payday loans, but the good news is that there are plenty of other options that don’t trap borrowers in a cycle of debt. One great alternative is a personal installment loan. A personal installment loan is a type of loan where you borrow a set amount of money all at one time. You then repay the loan over a fixed number of payments, called installments. Many installment loans also have fixed payment amounts, meaning the amount doesn’t change over the life of the loan, whereas if you have a variable interest rate that amount can change. These types of loans offer many benefits such as:
- Lower interest rate than most credit cards
- Use for a variety of purchases
- Consolidate high-interest debt
- Smooth your cash flow
- Boost your credit score
Furthermore, as part of our commitment to helping our customers meet their financial goals, TLC provide access to educational resources and incentive programs. By offering an installment loan as an alternative to a payday loan we want to see you on your way to financial recovery.
Our application process is quick and simple! All that’s needed is your social security number, address, phone number, income information, and bank information. Once we receive your application, our customer service representatives will contact you to verify your income and employment, you will sign your loan agreement electronically and be all set to receive your funds. Once you have signed online, you’ll receive your loan in your bank account on the next business day.
And don’t forget, YOU ARE WITH A RELIABLE COMPANY:
- No Extra Fees, You Always Know What You Pay
- 24/7 Customer Support
- All Data is Fully Protected