If you’re facing financial difficulty, you might be tempted to visit a payday loan store for an immediate fix. These establishments are commonly found in low-income neighborhoods and offer loans to people with bad credit who require cash now.
Payday loans are a popular way to borrow money, but they may also lead you down an expensive path with high fees and interest. Consider other options before opting for a payday loan.
They offer payday loans
Payday loan stores provide loans that must be repaid on your next payday, usually within two weeks. You either write a post-dated check for the full amount plus any fees due or give the lender permission to electronically debit your bank account.
These loans are popular among borrowers with ongoing costs that must be paid on a regular basis. They may also help cover unexpected expenses such as car repairs or emergency repairs for broken down cars.
However, many borrowers become trapped in an unaffordable and costly debt cycle as payday lenders charge high interest rates – the average APR being around 400%.
Payday lenders typically target communities of poverty and minority, such as those without a college degree, renters, African Americans and those earning less than $40,000 annually. Unfortunately, these loans can be highly predatory with often prohibitively high initial fees which compound each time the loan recurrs.
They charge high interest rates
Payday loan stores, also referred to as cash advance or check advance lenders, offer short-term loans. Unlike traditional credit cards, they usually do not require a credit check and provide cash within minutes.
To apply, you’ll typically need your pay stub and ID such as a driver’s license. A clerk may grant you a small loan of between $100-500 that must be repaid when paid next.
Fees on payday loans can add up quickly, particularly if you are unable to repay them at your next pay date. Unfortunately, many payday loan borrowers find themselves deep in debt.
To break free of this cycle, consider exploring safer options. Banks, credit unions and online lenders often offer small-dollar loans for emergencies at lower interest rates than payday lenders do. You could also ask family members for a loan.
They are a scam
No matter how hard regulators try, payday loan stores remain a go-to solution for people needing cash quickly. They’re accessible anywhere and open longer than regular bank hours, making them convenient options for those in need of financial relief.
Payday loans can be a viable financial option for some, but they should always be used with caution if the borrower doesn’t understand how they work. Unfortunately, these loans often become predatory and exploit vulnerable borrowers who don’t have other choices.
Payday lenders often employ questionable tactics to intimidate consumers who are already facing hardship, according to the Better Business Bureau. These groups typically rely on threatening letters and harassing phone calls in order to make their cases.
Other scams involve fraudsters sending you a deposit slip or falsely representing that your bank account has been “confirmed,” when it hasn’t. These types of frauds can be difficult to uncover, but if someone requests you return money because it was sent to an untrustworthy company, take it seriously.
They are not regulated
Many payday loan stores exist, yet many of them lack regulatory oversight. This poses a problem for those searching for quick cash without the high price tag attached.
Payday loan stores provide a range of small-dollar loans, such as cash advances and check cashing. Usually, these are short-term arrangements based on postdated checks or debit card numbers and you can expect to receive your funds the same day you apply.
Online lenders provide small-dollar loans without the hassle of visiting a physical location. Whether these services are more reliable or not depends on what works best for your financial needs and trust level. To find the right lender for you, it’s best to shop around and compare offerings on the CFPB’s website; they have resources available to assist in this endeavor.
