If you're in need of quick cash, a pay day loan may look like a good idea. But you know what they say, if it sounds too good to be true, it probably is.
"Initially I borrowed $301.52 cents," says "Jane" as she looks at a two year old pay day loan statement. Now, she has found herself in more than a $1,000 of continuous debt, all because of a pay day loan.
"It seems like a quick fix for what you're needing for that moment but it's not, it ends up being something you just can't get rid of," warns "Jane".
It starts with just a couple hundred dollars but with pay day loans, interest rates can be as high as 500% or more. Tempting some borrowers to get another pay day loan just to pay off the first one.
"It's just been a bigger hole that you put yourself into," said "Jane".
"Those holes only need to be dug in dire dire straights," said Pete Boronio, of Boronio Wealth Planning Solution.
Boronio warns of pay day loans, but "Jane" is not alone . In a study done by the PEW Research Center there are 12 million Americans spending $7.4 billion on pay day loans.
In order to prevent yourself from ever getting into this type of situation, Boronio says it all comes down to one word: Savings. "It's gotta start somewhere," he says. "Good habits start with small deposits, every month, every time there's discretionary income available."
If you do find yourself unable to pay your loans off, Bankruptcy Attorney Erin Shank says your best bet may be filing for bankruptcy. "Especially when they have a lot of them because it's just going to continue to spiral out of control and a bankruptcy discharges them," she said.
But Shank says before opting for pay day loans, you should go to friends and family first, something "Jane" says she hates to do.
"If you have someone offering to help you, go to them first if you can, and just swallow your pride for a minute I guess," said "Jane".
Because it's better than getting into a cycle of debt.