Payday Loans and Problems
Payday loans are part of a routine for some people making minimum wage and/or have expenses exceeding their income. While I try not to advertise payday loans (Google Ads might slip one or two), wishing them away isn’t going to help.
Payday loan centers are a business and make their money through fees and interest on their loans. I don’t have a problem with that aspect. My problem is that many lenders do not explain how it is possible to pay 5x-10x the loan amount in a year. I also had a friend’s sister get repeatedly charged by a shady lender after she paid her loan off and had to close a bank account to end it.
How Payday Loans Can Harm You
A former lender of a payday loan center shared her story.
Rebecca tells how payday loans are rarely two-week loans. Most of her customers came in payday after payday to renew the loan—after the first time, they couldn’t afford to pay it off. Rebecca tells how she and her co-workers explained away the 400% interest rate, and how tough their collection tactics were. And she tells how she came to understand that rather than help her customers, these loans were “keeping them poor.”
What Do You do If You Need a Payday Loan?
It comes down to lowering your expenses or increasing your income. If you can at least do one, you’re in a better boat. Doing both leads to building wealth.
·Prioritize your bills. Housing and food should be first on your list. Being able to see what is really important and what isn’t can help you allocate your funds correctly.
·See why you’re short on money. Did an unexpected bill come up? Was your paycheck shorted? Do you lack a budget or don’t stick to one? Finding the reason can help you avoid being stuck in this situation again.
·Contact the all companies that you’re in debt with andset up a payment plan.If you’re unable to pay the minimum for your credit cards, call them to set up an affordable plan. At the very least, ask them to waive fees and lower your interest rate. Some credit card companies are more willingly to work with you as the economy has hit many families hard. They would rather get some money than no money. Some utilties like electric will work with you on catching up with bills. You have to ask them about their programs.
·Contact your bank or credit union and see if you can qualify for a short-term loan. I’d try a credit union first based on my personal experience. My credit union had better rates than some of the big banks around.
·Sell an unnecessary item. I actually had done times a few times before. I sold some of my video games and DVDs to a store and got a decent amount of cash. I also discovered I didn’t need as many things as I thought I did.
Payday loans are a business and will be around as long as there are customers. If you want to avoid taking out payday loans, then find ways to spend less than you earn. Try out Ramit’s 30 Day Challenge to Save $1000. Even if you can’t save $1000, you’ll have some cash to stash in the bank for an emergency. Building wealth isn’t difficult, but it does take effort. I wish you all the best!
Photo Credit: Pwbaker