Payday Loans…they go by many names – quick cash loans, cash advance loans, deferred deposit loans, check advance loans, post-dated check loans. Call them what you will, but avoid them at all costs! These loans are often advertised on TV and online as a quick fix for your financial troubles and promise to help in the short-term, but will only cause you major stress when it comes to long-term financial well-being.
A payday loan, in the simplest terms, is a relatively small amount of money (example, $100 – $1,500) lent at a very high rate of interest (example, APRs that range from 100% – 1000%) with the agreement that it will be repaid when the borrower receives their next paycheck. Due to such high interest rates and associated service fees, consumer advocates and lawmakers advise consumers to avoid payday loans. They also warn about loan sharks, a person or body who offers loans at extremely high interest rates and often does so without following the proper financial regulations.
While payday loans have become illegal in many states, some dishonest lenders find loopholes in the system or risk offering them anyway. They prey on the financially vulnerable in order to make a large, quick profit.
If you’re in need of a short-term loan, avoid these classic payday loan features:
- Full payment due by next payday
- Failure to pay = costly consequences
- Triple digit Annual Percentage Rate (APR)
- High fees from $35 upwards if loan is extended and not paid on time
- Finance charges for every $100 borrowed from $15 – $50
Avoid loans associated with these descriptions:
- Fast or Quick Cash
- Get Money Now
- Bad Credit OK
If you already have payday loan debt, or find yourself in financial trouble, seek guidance from a trusted source. Contact the Co-op Credit Union for a safe, affordable loan or no-cost credit counseling. Perhaps you can turn to a family or community member for help and support. Use these reliable resources to create a realistic budget, gain the tools and knowledge to get financially fit, and make a promise to steer clear of payday loan dangers for good