Some Serious Talk about Payday Loans
By Kate Vaillancourt, Certified Credit Union Financial Counselor (CCUFC)
Many, many, many years ago — (did I mention this was MANY years ago?) — this northern Maine gal found herself in Savannah, Georgia, not far from Hunter Army Airfield. Never heard of it? I hadn’t, either. Just outside the base were countless payday lenders. I had never heard of such a thing, but they had large billboards promising money at “low” interest rates. “No credit check! We’re your friends! We’ll GIVE you money!” You get the idea. Usually, there was someone’s mugshot smiling face to assure you that this was someone you should trust.
I will admit, when my wallet was feeling a little thin, it was tempting. I just needed $100 and I could pay it back with my next paycheck. Sounded easy enough… What the billboards didn’t advertise is that it’s never that easy. Interest rates were high and the terms were purposefully difficult to understand — whaaat?
Today, instead of billboards, many payday lenders have the Internet with which to advertise and they are not holding anything back to get your business. If you are feeling desperate, they will swoop in to save the day. The landlord needs the rent, the car needs repairs, and the family needs food. Payday lenders will lend money with few questions asked. All you need to do is sign the documents (electronically to make it quick and easy), and money will deposited ASAP — maybe even TODAY — at 0% interest ***!
Well, you know the saying: If it sounds too good to be true, it probably is. The reality is that even if they claim to not charge interest, the fees they charge more than make up for it. According to the Consumer Financial Protection Bureau, those fees average about 400% of the original loan amount. Just thinking about it hurts my head and causes horrible anxiety!
Before signing any loan documents, I beg you to ask questions.
- What do those asterisks (***) mean?
- What is the last day for payment and what happens if you don’t pay on time?
- What fees do they charge and when?
- What payment methods do they accept?
- Is their contact information easy to find?
- Do they have a physical address?
- Are they licensed in your state?
- Can you see the contract before you sign?
- Are they pressuring you to sign right now?
I know those are a lot of questions, but if you can’t get clear answers from the lender, this is the first sign that the loan might cost a lot more to pay back than you expect. If you believe you have entered into a contract with a less-than-honest lender, report it to the Federal Trade Commission. Every report made will help them shut these places down.
If you are considering a new loan because you are struggling with your obligations, I may be able to help you to create a budget so you know what you can afford and what you can’t, before you apply. I can help you contact your current lenders to see if they can provide some relief, even if only temporarily. They may be willing to work with you until your situation changes. If not, they can give you an idea of what you are looking at in terms of your relationship and options with them.
When researching potential lenders online with words such as “reviews” and “scam,” you can see if others have had bad experiences; however, be careful with that, too. Scammers have a way of giving themselves rave reviews, so you may need to dig a little.
Before you act, check if there may be options that you haven’t considered yet. Acadia FCU provides free financial counseling to our members, so please reach out to me directly by emailing kvaillancourt@acadiafcu.org or calling 207-992-1060. I may be able to help steer you onto a better path.
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April 11, 2024