Dangers of Getting Payday Loans
Wanda is a hard worker. She goes to work every day but, her paycheck does not cover all her expenses. She discusses her situation with a co-worker who suggests she get a payday loan. Wanda is skeptical at first but, she considers the bind she’s in. She makes excuses to herself why it would be a good idea to get. “Surely”, she says to herself, “It will only be this one time and I will pay it back in full. I just need $500”. Well, Wanda decided to get the loan. It was great. She was able to pay her bill for that month. She had to give the loan agent a blank check to cover the loan and the interest. Two weeks later, Wanda received her paycheck but, it was all gone. Then she remembered the payday loan she borrowed. They took her for $575.
This is reality for millions of people. They live on the edge every month and borrow payday loans to help them get through. Payday loans should never be an option. They are short term loans for usually a few weeks at a time, but the interest that you will have to pay back is sometimes as much as 300%. They prey on people who are desperate and have no other options available. Once you are approved for the loan you will have to provide a verified bank account for the funds to be deposited into. They will also ask you for a postdated check for 2 weeks later for the amount you borrowed plus the interest. The postdated check coincides with your paycheck from the bank so that the check they receive clears. That’s why they’re called payday loans.
Life can really be tough if you are unable to meet your monthly obligations. There are other options besides payday loans. For example: you can get a credit builder loan to help build your credit and improve your fico score.
Here is how a credit builder loan works
- Apply for the amount you need. Different institutions offer different amounts
- Funds are deposited and held in your savings account until the loan is paid in full
- Each monthly payment build your credit and adds to your savings
- Make monthly on time payments. This will be reported to the 3 bureaus (Experian, Equifax and Transunion)
- Once your loan is paid in full, your savings account is now yours
Lenders that offer credit builder loans
A-First Financial Credit Union – They offer loans for either $300 or $1000 for 12 months. 12% APR but 50% of the interest is refunded.
B-Sunrise Bank – Offers loans for $500 for 12 months at a 21% APR or loans for $750 for 18 months at 15% APR.
C-Self Financial – Offers starting at $25 / month for 12-24 months and APR of 12-15%.
D-Digital Federal Credit Union – Loans of $500 – $3000 for 12 – 24 months and an APR as low as 5%.
Tips! It is a good idea to save on a regular basis. Start now! Don’t wait!
Read here: How To Protect And Save Your Finances
HOW TO SAVE:
- Record your expenses. Figure out your spending.
- Budget for savings & cut your unnecessary spending. Consider using the 50/20/30 plan. Where 50% of the budget is for essentials such as rent, bills, food etc. 20% is for savings and 30% is for personal entertainment.
- Save automatically every month from your bank account.
- Build an emergency fund
- Track your spending and avoid debt
- Set goals that you can achieve
- Save for retirement
Make savings a habit. Once you do that it will force you to do it on a regular basis. The important thing is to get away from having to take out a payday loan that could hurt you financially.