The average interest for payday loan is $15 for every $100 loan, or a whopping 15% every two weeks. The interest adds up as you continue to default. The interest rate alone can go as high as 500%! Because of the onerous conditions, the government has stepped in and put in protective measures for the poor, unsuspecting debtor. The extent of the protection differs from state to state. Assuming you have a valid contract, the creditor has the option to enforce the loan by filing a case. Some states do not allow this type of claims in small claims court. A wily creditor will go around this rule by allowing the interest to pile up to the jurisdictional amount for circuit courts. If the contract is valid, the debtor can be held liable for damages. There are some states though, which do not impose a penalty for issuing a bouncing check. However, know that there are practical repercussions to being dragged to court. It can be stressful to some people and of course, it eats up your time which could be better used in looking for a job to pay the lenders.
Some lenders will threaten to have you arrested. In most states, issuing a bad check has been decriminalized. The law assumes that since the check is post-dated, the lender knows that the account has no funds at the time of issuance. The lenders threats are therefore, mostly empty and merely an attempt at false bravado. In theory, they can affect your credit rating, but in practice, these types of lenders do not have a cozy relationship with the 3 big credit agencies. You may be unable to get another payday loan with them and others of the same kind.
The ridiculous interest imposed on payday loan should be a huge deterrent for anyone who want to get into bed with this payday lenders.Although times are tough, and you feel that you are standing on a cliff and theirs is the only lifeline around, think again. There are other ways to generate money that will not cost you an arm and a leg.