Payday loans trap consumers due to the extreme high cost and the very short repayment term. For example, after 14 days a borrower must pay the entire lump sum plus a $15 fee for every $100 borrowed. Or the borrower can roll-over the loan by just paying the fees (or worse -- rolling the fees into the next loan!). If roll-overs continue for just 4 months, the borrower will have paid $600 to the payday lender AND still owe the original $500!
- The typical payday borrower pays back $793 for a $325 loan.
- If a typical credit card borrower pays the same $150 per month to their credit card, they will pay off their $500 loan in less than 4 months and be debt-free!
Highlighted Articles and Research
By: Federal Deposit Insurance Corporation
Did you know? Borrowers of payday loans are required to have a checking account.
The widespread repeat use of fee-based overdraft programs and the growth of payday lending confirm that loans in small-dollar amounts are in strong demand. Consumers who make use of these products are institution customers because both products typically require consumers to have a checking account. Providing more reasonably priced small-dollar loans to existing customers can help institutions retain these customers and avoid the risk associated with high-cost products. Read more >>
By: Uriah King, Leslie Parnish, and Ozlem Tanik
Did you know? States that ban payday lending save their citizens an estimated $1.4 billion in predatory payday lending fees every year.
The Center for Responsible Lending reports that the payday industry now exceeds $28 billion a year and costs American families $4.2 billion per year in excessive fees. States that ban payday lending save their citizens an estimated $1.4 billion in predatory payday lending fees every year. Read more >>
By: National Federation of Community Development Credit Unions (NFCDCU)
Did you know? Credit unions are able to lower costs of payday advance loans by linking repayment to required direct deposit of paychecks.
The NFCDCU looked at ways in which its member credit unions could offer products that were similar to pay-day lenders without the ridiculous high interest rates. This article highlights 4 programs that NFCDCU's have used with their clients and other possibilities to alternatives to predatory lending. Read more>> (PDF) |
