Short on cash? Need money for an emergency? You can get money quick and easy! Have you ever heard anything that sounds like this? Have you ever thought it might be a good idea? Payday loan sharks are everywhere and they advertise a quick and easy way to get money without credit and they are right. They are quick, they are easy, but they are anything but smart and they certainly are not ethical.
I am a member of a group of financial coaches and the topic of payday loan sharks has been quite popular lately and for good reason. Payday loan sharks make it sound like they are a quick and easy way to get money, which they are, but then they do everything to cover up how much it actually costs to take out a payday advance, loan, or whatever other term they use. This does not exclude title loan places either; they are one in the same evil! Yes, evil. Anyone trying to get you to take out a payday loan or a title loan is doing nothing more than robbing you with your permission. Maybe you think this sounds a little bit harsh, but let’s look at the facts and then you can decide whether I am being harsh or not.
Payday loan sharks like to advertise their deception by saying that you can get cash fast for a small fee for your paycheck. So how much cash are we talking about? Typically payday loan sharks will loan you anywhere from $100-$1000. With a loan amount so small how much trouble could someone really get into? We’ll see in just a minute. So then they advertise it like this. Get $100 today for only $17 to help you with your emergency or unexpected bill. You see the law requires them to disclose their fees and how much the APR is on your loan, but they almost always hide the APR by listing instead how much the fee is for the money. Most people who have used a payday loan see the fee and confuse it with an APR when asked about it. So how much APR is a $17 fee for every $100 taken out for 14 days as advertised with this place? The APR is actually 443.21%. Another place that I found had an interest rate of 651.79% for an online loan.
When I tried to find the APR for the first payday loan shark with the 443.21% fee it took me ten minutes to actually find. Their fee was prominently displayed, but then the APR was buried in fine print and located on the page in a place you would not naturally look, but it’s not like they were trying to hide it or anything right? Yeah, I’m sure! Then when I actually clicked on the link to take me there it took me to a picture that was so small that you could barely even read it. Do you see how ethical these places are? They don’t even want you to know what it actually costs you to take out these things because they prey on people who are in need of a quick buck and often times are desperate, then once you get a loan you typically cannot get out of it. They know that the typical person taking out a payday loan will refinance the loan over and over again and that if they can get you to take out one loan that they will collect way more than what you came in for. One site I went to actually had a customer notice that read, “A single payday advance is typically for two to four weeks. However, borrowers often use these loans over a period of months, which can be expensive. Payday advances are not recommended as long-term financial solutions.” Good advice huh!
One site I looked at stated that on average the borrower receives 8 to 13 payday loans a year from a single shop with most of those being rollovers. The increased problem with this is the fees. If you are late in your payment you will inquire a late payment fee, when they try to collect their funds from your checking account, if the money is unavailable you will be charge a fee of typically around $25 not to mention the fee from your bank for bouncing a check.
When everything is said and done with many find themselves in a cycle of indebtedness that they simply cannot get out of. Borrowers find themselves hunted down and harassed by these sharks who quickly turn them over to even more aggressive debt collection people who are relentless and even though they are governed by what they can do, what they can say, and how often they can call you they will do their best to make you feel like you are the scum of the earth for not repaying what you owe and are not beneath threatening even jail time. These tactics are illegal and should be reported immediately! For more information on your rights click here.
Getting out of a payday loan can be difficult, but it needs to be done immediately. If you cannot repay the loan you need to the lender immediately and check into extended repayment options. It may cost you a little more in fees, but if you can avoid bounced check fees, insufficient fund fees, rollover fees, etc. you will be better off. It would be wise to close that account that your payday loan is linked to in order to avoid further charges. You can write the lender and revoke your authorization for automatic checking withdrawals, but they may not listen. You should also tell your bank that you have done this if that is the route you have chosen to go. You can also put a stop payment on the account, but this is often associated with a fee and you should also monitor your account if you do these things. Federal law gives you the right to dispute and get your money back for unauthorized transactions. Often times it is best to just open a new account and transfer everything to the new account and never visit a payday loan shark again.
So what is the alternative to going to a payday loan shark? The alternative is being prepared in advance. Unexpected things happen in life, but we can do some things to be prepared. The first thing that you can do to help protect yourself is to start budgeting and build an emergency fund. I typically recommend $1000 until your debt is paid off and then a full emergency fund should consist of 3-6 months of living expenses. Once you have $1000 saved you need to get out of debt! This is a need and it is something that we all need to get through our heads. We have allowed ourselves to be deceived for far too long by lenders saying that we need debt or that we need to build up our credit score. You do NOT need debt and you do NOT need a credit score. A credit score only tells lenders how good you are with debt. IF you are worried about having a credit score to buy a house then don’t. There are plenty of places that can do manual underwriting for a home mortgage and if you have a zero credit score they can work with you.
Payday loan sharks should be avoided at all costs! You will NOT win if you go swimming with sharks, you will get bit, maybe not the first time, but you will get bit and it will cost you more than just money. If you find yourself in a situation where you absolutely are in need of a little more money to get by there are things you can do. Contact me to learn more about the options that you have, but do NOT visit a payday loan shark, EVER!
For more information or for help getting out from underneath a payday loan call me today! If you want to build a plan to protect yourself from ever getting in this situation I can help with that too. If you have not taken control of your finances there is no better time than now to do so. When you are already in financial trouble it will cost you far more than to get on top of things now. You can do this and I am here to help.