Why are they so bad?
· The Center for Responsible Lending suggests that repeated payday loans result in $3.5 billion in fees each year. And if a typical payday loan of $325 is flipped eight times, the borrower will owe $468 in interest; to fully repay the loan and principal, the borrower will need to pay $793.
· Some lenders set up direct deposit loans with your bank account. Therefore the loan money automatically goes in, but the fees and interest are also automatically taken out.
· When a loan is not repaid lenders often go after borrower’s social security benefits even though it is technically not allowed.
So, what are other options?
1. Call the company first to work out payment plan- Calling a 1-800 number and talking to a recording is no one’s idea of a good time but letting a company to whom you owe money know you are aware of the situation and working to create a payment plan will make them much more forgiving and willing to help you out.
2. Go to support your system- Although no one likes asking friends or family for a little financial help, in short term periods such as this they are probably your safest option. Asking for a small, two-week loan to pay the bills won’t seem too bad. Create an agreement to pay some interest on your loan, for example 10-20% and pay it back immediately after you receive your next pay check.
3. Check out small bank loans- More and more banks are beginning to offer small, short-term loans as alternatives to the dangerous payday loans. A typical small bank loan offers loaning up to $1,000. Also, the FDIC has capped interest rates on these loans at 36%, which sounds much better than the previous 400%.
Monroe County Resources to Help in Tough Times
It’s Your Money
Bank on Bloomington