The Problem with Payday Loans…And a Possible Solution for Cash

The problem with payday loans is that they are habit-forming and tend to lead to greater poverty.  Payday loans are not fraud, but they can cost consumers a lot. A payday loan is a cash advance secured by personal check or paid by electronic transfer.  You write a check for the amount you want to borrow plus the fee for borrowing the money.  The lender gives you the amount borrowed and agrees to hold your check until your next payday.  However, if you come up short on payday, you have to pay new fees to roll over the loan, thus making the borrowed money more expensive each time the loan is extended. According to the Center for Responsible Lending, 90% of the payday lending business is from borrowers with five or more loans per year, and the typical interest rate on a two-week payday loan has an annual interest rate from 391 to 521.  The average borrower has nine transactions per year. Alternatively, you could shake down the coach for coins…or look into Florida Treasure Hunt with the State’s Bureau of Unclaimed Property.  Jeff Atwater, Chief Financial Officer of Florida has over a billion dollars’ worth in dormant accounts and […] Read More

Payday Loans: The Poor Get Poorer

If it looks too good to be true, it is probably a payday loan.  While payday loans have to disclose in a dollar amount and annual percentage rate regarding how much they cost to borrow, they also rely on repeat business to extend the loan, costing the consumer a rate of nearly 400 percent or more.  Whether or not the borrower understands that, it costs them money. Payday storefronts outnumber Starbucks by about two to one, but do not tend to be located in the same neighborhoods.  Marketed towards low-income demographics, the loans build a clientele on recycled debt rather than a long-term positive impact.  Repeat borrowers make up 98% of payday loan volume. Payday loans are on the watch list for the Federal Trade Commission as well as the Center for Responsible Lending because they are a great way to make money…if you are the lender. A payday loan is a cash advance secured by personal check or paid by electronic transfer.  You write a check for the amount you want to borrow plus the fee for borrowing the money.  The lender gives you the amount borrowed and agrees to hold your check until your next payday.  However, if […] Read More