New video counsels consumers to “just say no” to payday loans

Experts

Public Policy Fellow
Staff Attorney
Staff Attorney

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.

 

https://www.facebook.com/video.php?v=10152803021089051

Do you have a payday loan experience to share? Please tell us about it!

2 responses to “New video counsels consumers to “just say no” to payday loans”

  1. The real thing to avoid when it comes to payday loans is the rollovers. The bad problems come when someone takes out a $500 payday loan and ends up paying $10,000 in Interest.

  2. Doran Waugh says:

    It is true that payday loans come at high interest and leave borrowers in debt cycle, which they cannot get out of. But if the loan is managed carefully and the repayment is done on time, you won’t face any trouble.

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