Are Payday Loans Bad?

You see them everywhere – quaint little shacks advertising “Instant Money, No Credit Check.” While browsing the net, you catch the pop-up ads out of the corner of your eye for “Overnight Cash Up to $1500.” You hear an ad on the radio to “Get your cash now.” The argument for payday loans is that a high interest loan is better than bounced check fees, credit card late fees or jacked-up interest rates.

For responsible, working people who fall just a little bit short, payday loans can be a helping hand in a desperate situation where time is of the essence.

There is one caveat, however: you MUST repay that loan within 15 days! Typically, you’ll go to a payday loan center, which resembles a bank, and you’ll fill out a few quick forms. You may need to show ID, a piece of mail with your address on it and several of your most recent pay stubs. There will be no credit check, though, which is usually what ruins the loan approval process for borrowers with bad credit. Then the money owed will be automatically withdrawn from the borrowers’ bank account at the end of the borrowing period. If the money is not paid, a judgment can be sought and additional fees will apply. can cost consumers a ton of money in the end, which is why fifteen states have banned this type of financial transaction. According to the Americans For Fairness In Lending, payday loans cost consumers $4.2 billion in predatory lending fees each year!

Alternatives to Payday Loans

When you need money and you need it fast, there are better ways to free up cash other than paying 36% interest. According to the FTC, you may be able to gain approval for a credit union loan from a local financial institution. Even if banks have turned you down before, credit unions and community groups are a little more lenient. If you get turned down again, consider asking a friend or family member for a helping hand: you just might be surprised!

Another option to escape credit card debt is to shop around for low or 0% interest credit cards to consolidate all your credit onto one card, rather than paying all different interest rates that can be as high as 28% if you’ve missed a few payments. If you’re just worried about missing your due date, did you know you can call and ask your creditor to change the due date to something that works better for your payment schedule?

Similarly, a Debt Consolidation loan program through a non-profit organization can help you come up with a reasonable monthly budget and pay off your debts. You’ll be able to cut your monthly payments around 50%, pay one monthly bill (rather than a bunch), you’ll pay off your credit cards in half the time and your life will be far less stressful without creditors breathing down your neck all day long.

Debt settlement is another alternative. A non-profit organization will work with your creditors to find a lower, acceptable amount that you can afford to pay and your creditor will consider the debt paid off. While debt consolidation requires you to eventually pay off everything you owe, debt settlement will often save you 40% or more!

Simply keeping track of your expenses can often be illuminating. Perhaps those beers after work or those morning coffees and lunches with coworkers have added up beyond your means. You may opt to cut your $60 cable package down to a bare bones minimum for now until you’re caught up. If your problem is bank fees, then ask about Overdraft Protection, which will save you that hideous $30 fee every time you borrow a little more than what’s in your account.

How to Stop Collection Calls

Some people turn to payday lenders as a desperate measure to stop harassing collection calls that have ruined their lives and made them feel like prisoners in their own homes. If the people phoning you are calling before 8am or after 9pm, using threatening language, lying about who they are, calling you at work after you’ve asked them not to, threatening to arrest you or continuously pester you with the intent of wearing you down, then they may be in violation of the Fair Debt Collection Practices Act. You may file a complaint with the FTC to stop the harassing calls. Sometimes if you just write to the creditor and request that they stop contacting you further about this debt, they will cease communication. (In some cases, they may decide to sue you as a last recourse, but not always.)

You can also stop collection calls by enrolling in a Debt Consolidation or Debt Settlement program. Your creditors will see that you’re attempting to get your financial situation under control once again and they’ll be receiving regular payments again, so you won’t receive anymore nasty callers. The credit counselors are on your side completely and are much better to talk to.

Most Common Payday Loan Company Fees

Alabama Maximum Finance Charge: 17.5%
Arizona APR for 14-day $100 Loan: 459%
California Average Payday Loan APR: 400%
California Finance Charge for 14-day $300 Loan: $52.95
Ohio Maximum Payday Loan Amount: $800
Oregon Highest Annual APR 7-day Loan: 886%
North Carolina Small Loan Maximum Interest: 36%
North Carolina Monthly Late Fee on a $255 Loan: $90
Nevada Average Borrowing Fees for $200 Loan: $35 – $80
Average Interest Cost on a $500 Loan Outstanding 3 Months: $631.10

Are Payday Loans Bad?

Alternatives to Payday Loans

How to Stop Collection Calls

Most Common Payday Loan Company Fees

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