When clients face unexpected expenses such as medical bills, car repairs, or overdue rent, payday loans might be tempting. But these are expensive loans and they can trap you in debt. Find out how they work and about other possible ways to get money or credit quickly.
Payday loans are small, short-term loans (usually $500 or less) meant to cover urgent expenses until your next paycheck. While they offer quick cash, they come with very high fees and interest rates, often equaling APR rates of nearly 400%. Borrowers typically repay the loan in two to four weeks, either by allowing the lender to withdraw money from their bank account or by providing a check. If the loan isn’t repaid on time, lenders may offer rollovers that add more fees, making the debt grow quickly.
For clients seeking emergency financial help, payday loans can be risky. The FTC recommends considering lower-cost alternatives like credit union loans, payment plans with creditors, or community assistance programs, and always reading the terms carefully before borrowing. Click HERE to read more about payday loans
What can I do if I can’t repay my payday loan? You deserve options that don’t make things worse. Let’s look at safer ways to get through a situation like this. Below are some possible alternatives to payday loans
- Ask your creditors for more time to repay them.
- Try to get a loan from a credit union.
- Visit a community bank.
- Check with local branches of large banks in your area.
- Use your tax refund.
- Ask your employer for an advance.
- Get help managing debt with a credit counselor.
- Ask family and friends for help.
- Contact local charities and churches.
Click HERE for another resource on Nonprofit Credit Counseling and Debt Relief
