Stop Getting Payday Loans


Dangers of Payday Loans

So times are getting really hard and you notice that you need money quicker than you are getting paid. You decide to go to one of the many cash advance or payday loan stores that you see.

You show them your ID, a recent paystub, and write them a postdated check of how much you want to borrow, to include their fees. After that, the money is either given to you in cash or deposited into your account. Seems pretty simple right, well it is a little deeper than that.

If you borrowed, or should I say got a cash advance of $100 from Amscot it would cost you $11 for a 14 day period of repayment. That is an APR (Annual Percentage Rate) of 286.79%.

Some of the highest credit cards have APRs of about 25%. If that check you wrote bounces after the 14 days, then you will be charged $54, which makes your APR 1,408%. That does not include the fees that your bank will charge you.

If you were actually able to pay that $100 back in 14 days, then you would only be charged that $11. Unfortunately, if you have to resort to a cash advance, then that means things have gotten really bad.

When your next payday comes if you pay the cash advance back, now your paycheck is short and you will most likely need to roll that loan over, or borrow more money.

Many people get caught in this vicious cycle and it is hard for them to get out. According to a 2014 consumer report from CFPB (Consumer Financial Protection Bureau), 80% of all cash advances are rolled over or followed by another loan within 14 days.

With numbers like those, it is no secret why these stores target areas of low income. They use to target active military members and their spouses, but in October 2007, a Federal Law was put into place that prohibits payday loans and cash advances to active duty military members, their spouses, and their children.

If a Federal Law had to be created to stop military members from getting cash advances, you know it was bad.

So, if you are thinking about getting a payday loan, I encourage that you reconsider. If you are currently in a cycle of a payday loan, do not be embarrassed.

You would be amazed at the amount and type of people that get them. This article is not meant to judge you, but to encourage you to find alternative ways to dealing with your financial crisis. Below are a few tips on alternatives to payday loans.

  • Borrowing from a trusted friend or family member (with a payment plan and contract if necessary)
  • Getting a cash advance from your credit card (fees are way lower than payday loans)
  • Small loan from your bank
  • Debt management counseling (many free sites available online)
  • Cutting unnecessary expenses (cable, bar tabs, eating out)

You may be in a rut for now, but it will pass. Get educated on the things that you do not understand with regards to finances. Now may be the time that you start changing some things in your life.

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