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A solution for Tennesseans to end the vicious cycle of debt

Most Chattanooga, Tennessee, residents usually prefer long-term financial goals to short-term ones. However, Americans are not applying this principle when facing emergency expenses that may ruin a monthly budget. Short-term, unsecured loans called "payday loans" are offered to cash-strapped, credit-damaged consumers who have no recourse but to finance one of these loans for high interest rates and fees. For Tennessee residents, payday lending companies offer a short-term financial solution that can be reliable when the borrower needs cash quickly.

However, payday loans that are not paid off on time are hidden debt traps that could drown borrowers alive. Borrowing cash via a payday loan actually promotes a destructive cycle of debt and never-ending financial challenges. In fact, a Consumer Financial Protection Bureau study stated that 80 percent of these loans are renewed for additional fees and interest within 14 days of the first loan, instead of paying off the loan. This cycle of habitual refloating can inflate the annual interest rate to more than 400 percent. The study pointed out that half of all loans are reissued at least 10 times.

A Pew Charitable Trust report stated that 69 percent of newly issued payday loans are used to pay monthly bills, such as credit card bills, rent and utilities. The Pew study found out that an average customer was in debt for five months for an average of $375.

Short-term financial solutions, such as payday loans, seem like a good idea to pay those unexpected expenses. However, once the borrower relies on these unsecured loans, it is difficult to break the cycle of debt.

Fortunately, Tennessee borrowers who want to end the cycle of debt created by payday loans have many legal options. A Chapter 13 bankruptcy filing may save a consumer from the payday lending debt trap. The process could also negotiate manageable payments that will be suitable for an individual financial situation, so the borrower can begin a fresh start.

Source:, "Personal Finance: Payday loan data belies industry claims," Chris Hopkins, April 9, 2014

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-624-4002
Toll Free: 800-257-7594
Fax: 423-624-0509
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