New video counsels consumers to “just say no” to payday loans
By Maureen Mahoney on Thursday, February 5th, 2015
Payday loan advertisements often make them sound like a great deal — offering instant cash to consumers who need help covering their bills before their next payday.
But the ads don’t tell you that these toxic payday loans are extremely expensive. It’s rare that a consumer is able to pay back the loan right away. One consumer told us that he ended up paying almost $1,000 in interest! Donald of Akron, Ohio shares his story:
“I was in a bad jam earlier this year where I needed cash to feed my family and pay a bill. I had no other choice but to use an online lender. I paid back right around $1000 and still owed the full principle! It took about 6 months to get out of the payday advance cycle. You are broke because of the advance so you have to get an advance. It’s a bad cycle. I don’t have a problem with them making money but they are out of control.”
Donald had to take out additional payday loans to cover the original – a practice that is surprisingly typical. According to the Consumer Financial Protection Bureau (CFPB), consumers will either roll over or renew four out of every five payday loans within a couple of weeks.
Consumers Union is here to help. Our new video features Consumers Union experts and gives consumers useful suggestions for alternatives to payday loans – and tips on what to do if you find yourself trapped in debt. You can access our video here.
Do you have a payday loan experience to share? Please tell us about it!