One of the big problems with personal finance is that there are a lot of people out there who are making money off of those who can least afford it. As the bankers like to say, those who do not understand compound interest are doomed to pay it.
Among the worst offenders are payday lenders. John Oliver has a strong take. And he’s right. The interest rates are sinful (and I don’t say that lightly); the business model assumes that you keep coming back and paying more and more. Yes, I know, these loans are risky, but how risky are they really? Shouldn’t 100% interest be enough compensation for the risk of someone not paying anything back? Why does the rate have to be 300%? or 1000%? And why do so many politicians thwart such things as stronger disclosure?
All that being said, people do get into a bind sometimes. What if you need money fast? Here are two resources for you.
First, the folks at About.com have a great list of ways to get out of a financial jam without resorting to a payday loan.
Second, many credit unions offer payday loan alternatives – unsecured, short-term, and signature loans – with interest that reflects the risk – around 30% or so. MyCreditUnion.gov can help you find a credit union near you. Some require you to work for a member employer, others that you live in a specific geographic area. If you spend time with a search engine, you will probably find community banks open to anyone that also have payday loan alternatives.
If you’re in the Chicago area, Chicago on the Cheap has a list of credit unions offering personal loans.
I have always heard that Payday Loans were trouble but I didn’t realize the interest could get so astronomical! It amazes me that these types of business are still around after the government crackdown on the banking system a few years ago.