Payday Lending: Takes a Killer Bite Out of Your Finances
If you need a few bucks to tide you over until payday, you might be tempted to go to a payday lender. Even though payday lending is illegal in the state of Maryland, it's easy enough to find an out-of-state lender.
If you are tempted to go to a payday lender for some short-tem cash, we have one word for you:
DON'T! These high interest loans will take a killer bite out of your finances, and soon you'll be drowning in debt.
Here's how they suck you under:
1. You go to the payday lender for a short term loan — usually about 2 weeks in duration. These loans average about 400% Annual Percentage Rate (APR). They intentionally target people who cannot afford the loan.
2. At the end of the two weeks, you still don't have the money to pay back the loan with interest, so you will be extended another loan, again at 400% APR, now on the original balance plus the interest from the first loan.
3. You become caught in a cycle that becomes harder and harder to break with each loan you take.
To get the loan, you must provide a postdated check or information to electronically debit your account. When the money is not available in your account, you also get hit with insufficient funds fees from your financial institution.
Some members try to close their checking accounts to avoid paying back the loan. The payday lenders may end up prosecuting those members for writing fraudulent checks.
Our best advice is that if you haven't used a payday lender, don't get sucked in. If you have already been a victim of these legal loan sharks, contact the credit union to see if there is some way we can assist you.
We also offer free financial counseling through a partnership with Accel. Accel counselors are available Monday through Thursday 8 a.m. to 10 p.m. (EST), Friday 8 a.m. to 7 p.m. and Saturday from 9 a.m. to 1 p.m. To use this new service, simply call 1-877-33ACCEL (332-2235) or visit them on the web at www.accelservices.org.
For additional information, visit the Center for Responsible Lending.