You’re in a financial bind and need some quick cash. You’ve seen payday loan stores all over town and think “Maybe I should try that…” Don't fall into that trap! Getting a loan with a payday lender could send you down a deep hole that may take years to get out of.
Here’s how payday lenders catch and hold consumers:
To receive cash, you write a check to them for the amount plus the finance charge, which the lender will cash the next time you get a paycheck. They’ll tell you finance charges range from $15 to $50 per $100, but won’t tell you exactly what the interest rate (or APR) will be. Interest rates can run from 390 to 780%, and if your state does not cap the maximum cost, the rates can be even higher!
Here’s the math to figure out what you’d end up paying by borrowing $400 from a payday lending store. There’s a finance charge of $50 and a 14-day term:
At the end of your 14-day term, you have to pay them $450. But if you can’t pay it off entirely, you’ll have to roll the balance over, pay another $50 fee, as well as interest charges. At the end of your second term, your balance is almost $600, and if you can't pay that off entirely, you roll it over again. See how quickly your $400 loan can cost you thousands of dollars?
So what are some alternatives?
No one wants to find themselves in a financial emergency, but there are much better options than turning to a payday lender. To find out more about payday lending and learn about safer ways to get quick cash, visit the Consumer Federation of America webpage www.paydayloaninfo.org/consumer-help.
If you’d like help getting control of your spending, see us at Sun Federal Credit Union. We’re committed to helping our members gain financial well-being and offer one-on-one financial counseling as well as additional resources to help you get control of your finances. Contact us at 800.786.0945 or click here for more information.
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