It’s Christmas time again and many Dallas-Fort Worth residents find themselves financially stretched. Buying gifts for family and friends can often completely deplete bank accounts, credit cards and even the kid’s piggy banks. Unfortunately for many, when January 1st rolls around, they still have the mortgage/rent to pay and other necessities, often forgotten while wrapped up in the spirit of giving. That leads many to take out the dreaded “payday loan” just to make ends meet. We’ve talked about this dangerous form or debt before; but Chrismas time makes many very vulnerable to falling into the payday loan trap, so we’re going to talk about it again.

Payday loans are the quickest road to financial disaster, just in case you were wondering. Many people who take out payday loans end up paying astronomical amounts in fees, such as paying $800 on a $300 loan and that is not an exaggeration. According to a study released by Vanderbilt Law School, over 10 million Americans borrow money using payday loans annually and I’m sure many of those people start borrowing right around Chrismas time. The study also said that customers approved for payday loans are more likely to file for bankruptcy than those who were denied payday loans. That’s right, the people who were denied a payday loan were more likely to avoid bankruptcy.

If you want to avoid becoming a payday loan victim this holiday season, pay for want you need first and limit the amount of gift giving this year if your budget can’t accommodate it. If you have taken out payday loans and find yourself in a financial hole you can’t dig out of, please note that payday loans can be discharged in bankruptcy.

As job losses increase in the Dallas-Fort Worth area many people are living paycheck to paycheck and feeling forced to take out payday loans just to make it to the end of the month. But many of those people find that they are not able to repay the payday loans even once they receive their paychecks. So now payday lenders are starting to use a collection tool called “voluntary wage assignment.” Voluntary wage assignment is where the borrower agrees to willingly have their employer deduct a specific amount of money from their paycheck to repay the payday lender. It’s similar to a garnishment with one major difference, the borrower agreed to it by signing a contract with the payday lender. Surprised? Don’t be, a voluntary wage assignment is now quickly becoming standard in payday loan operations. If you’re taking out a payday loan do not sign a “voluntary wage assignment” under any circumstances. If you have already signed a voluntary wage assignment, you can revoke it by sending a letter to the lender. It is important to note that payday loans can be discharged in bankruptcy.

The DesMoines Register has a great column about how payday loans don’t really help the poor manage debt but in fact creates new debt and more stress. I couldn’t agree more!

The Des Moines Register: "A single payday loan is a terrible deal. The $15 fee on a two-week, $100 loan yields an astronomical 390 percent annual percentage rate. At that rate, a payday loan is comparable to money from a loan shark or the Mafia, albeit with better customer service."

Not just that, but taking out payday loans with their astronomical interest rates can create a new financial disasters for those already teetering on the edge. These loan services require that you write a post-dated check for repayment. What if you don’t get paid on time and your checking account is short? Now you have a bounced check, bank fees, fees from the payday lender in addition to the money you owe, plus interest. If you find yourself repeatedly needing payday loans to make ends meet, you may want to seek financial or credit counseling.

Payday loans are instant short terms loans. Payday loans are also called cash advance or cash advance loans. They are useful if you need a small loan to get you to your next paycheck. Payday loans are regulated by state laws.

Payday loan laws were enacted in Texas in 2000. A payday loan lender must apply and obtain a license before operating in the State of Texas. A person is said to be in the business of payday loans if he makes cash advances for a consumer’s personal check, or in exchange fore the consumer’s authorization to debit the consumer’s deposit account.

The law prescribes the service and handling fees a lender can charge.

Service fees

Handling fees

The payday loan agreement must contain:

• the named of the lender,
• the transaction date,
• the amount of the check,
• an itemization of fees,
• the earliest date the check must be deposited,
• a total amount expressed in U.S. dollars,
• an annual percentage rate,
• the name, address, and phone number of the Consumer Credit Commissioner.

The lender must provide a fee schedule along with the agreement. The agreement must also provide a notice that sates payday loans are intended for short-term cash needs. The lenders cannot divide one loan into two loans for the sole purpose of collecting higher interest fees. The maximum term limit for payday loans in Texas is 31 days. The minimal term limit for payday loans is 7 days. A payday loan can be renewed one time each month.