POSTED: Friday, December 13, 2013 - 7:54pm
UPDATED: Friday, December 27, 2013 - 9:55am
With just 11 shopping days left this holiday season, and a rush to get all your presents bought, you might be considering buying those Christmas gifts with a payday loan.
But the Better Business Bureau warns that may not be the smartest way to make some fast cash.
The BBB says high interest rates, unaffordable payment terms and high-pressure collection tactics can make these debts impossible to get out of. According to a study by the Consumer Financial Protection Bureau, the annual percentage interest rates for payday loans average 339%.
People looking for fast cash sometimes turn to payday loans. But the BBB says these fast cash loan can end up doing more harm than good.
Spokeswoman Margo Lepe says you can get caught in a debt cycle. This forces borrowers to repeatedly have to renew the loan and pay associated fees every two weeks until they can finally save enough to pay off the principal and get out of debt.
Before you decide to take out a payday loan, consider some alternatives like small bank loads, credit counseling and credit cards.
But if you have no other option but to get a payday loan, Lepe says there are things you can do to help protect yourself.
- Start with trust. Check the company’s BBB Business Review to see its rating, history of complaints and other information. They give every business a grade to let you know what standing they are in.
- Never pay an upfront fee. Some short-term providers will ask for a post-dated check to cover the amount you borrowed plus interest and fees.
“You should never have to pay a fee up front if you are borrowing money,” Lepe said. “That is a big red flag in itself. If they ask you money right off the bat, if they ask you to leave a certain deposit, I would just turn around and walk away.”
- Limit the amount you borrow. Only borrow what you know you can pay off with your first paycheck. Most companies will allow you to “rollover” the balance for several weeks or months, but will tack on fees the whole time.
- Read the fine print. Pay close attention to fees and consequences of non-payment. Will the company allow you to make arrangements if you cannot pay?
- Get everything in writing. Many consumers said they started receiving calls from collections agencies years after they paid off a payday lone. Some of these calls were simple errors; others were attempts by scammers to collect a debt that is not owed.
- Know where to turn. If you feel a lender has committed fraud or taken advantage of you, file a complaint with the BBB and the Texas Attorney General You can also call the BBB at (915) 577-0195 or visit their office at 550 E. Paisano in El Paso.