Considering a Kentucky payday loan? Beware the many drawbacks.

Payday loans often lead to more financial woes.

When you are financially strapped and facing an unexpected debt (an emergency room visit, a vital auto repair, a broken appliance), you may be feeling desperate. You might have seen commercials on late-night television for places you could go to get the money you need very quickly and with no credit check. That is tempting, since you have less-than-perfect credit that makes a traditional bank loan or credit card not an option for you. You decide that you will visit one of these so-called "payday loan" stores to get the cash to cover the unanticipated debt you're facing.

The premise of a payday loan sounds good in theory: you can walk into an establishment, hand them a post-dated check for the amount you want to borrow plus any fees and interest, and receive the money almost instantly. All this is done without the credit restrictions found at banks and credit unions. As long as you have a job or verified source of income, you could easily be approved for up to $500 in payday loans in Kentucky. State law caps these loans at a total of $500 per person at any given time.

The money doesn't come without a price, however. The proverbial pound of flesh is taken in the form of exorbitant and usurious interest rates and origination fees. Updates to Kentucky law in recent years have limited the interest on each $100 you borrow to $15, but there are also fees and charges that could be tacked on by the lender.

If you find yourself unable to pay back the original loan at the predetermined time - most of these loans have a term life of about two weeks, as they are meant to be a bridge between paychecks - you can take out a new loan to cover the amount, plus additional interest. Unlike in some states, Kentucky doesn't allow you to "roll over" the loan amount, but lenders have gotten around this dictate by just tearing up the original loan contract and writing a new one with the added interest and fees included.

It helps to see this in a practical example. Let's say your original loan was for $200. You had agreed to pay a total of $225 including interest at the end of the loan period, but found yourself unable to do so. You can request more time to pay it off, at the cost of additional interest and fees. You now owe a total of $256 at the end of the two-week loan period. When amortized, this loan comes with an annual interest rate of 730 percent. In comparison, even the "worst" credit cards usually don't charge more than 25 or 30 percent APR.

It is easy to get trapped in a cycle of debt with payday loans. Very quickly, you get to a point where you owe much more in fees and interest than your original loan was even worth, and it could end up taking months or years to pay it off, particularly if money was already tight. If you are in dire financial straits due to unmanageable debt, you should strongly consider a bankruptcy filing or other viable solutions instead of payday loans, car title loans or other risky short-term, "band-aid" options.

To learn whether bankruptcy could be right for you, contact the Paducah law offices of Marcus H. Herbert & Associates for a free consultation. You can call them toll free at 866-702-8933 or locally at 270-908-0552 or send an email.