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PAYDAY LOANS: Not as cheap as you think
July 1, 2011
"Payday loans," which are also called cash advance, check advance, and post-dated check loans have become increasingly popular for fast cash. Consumers may be misled into thinking that payday loans are a cheap and convenient way of borrowing money for the short term. However, they often have difficulty repaying the loan
because it leaves little or no money to cover their living expenses. This results in the borrower paying more fees while obtaining no additional cash in return. With average annual interest rates ranging from 390% to 871%, payday loans are no bargain.
Consider this example: If the check is written with a face value of $200, a 15% fee ($30) is applied. The amount paid to the borrower is $170 and the lender receives $30, which translates to an APR of 458% if the loan is repaid in two weeks. If it is rolled into a new payday loan, an additional fee of $30 is charged, the loan is raised to $230. In other words, it could cost $60 to borrow $170 for one month. Instead of resorting to this type of borrowing, come in to Decatur Earthmover Credit Union and sit down with one of our representatives. We'll help you evaluate your situation and find a better option that won't leave you in a vulnerable position.
