Ask Andy: Payday loans - WMC Action News 5 - Memphis, Tennessee

Reported By Andy Wise

Ask Andy: Payday loans

Payday loans are something you should never, ever consider.  I don't care how desperate you may be for cash.  A payday loan is one of the worst things you can do.

It's a short-term cash loan based on you giving the payday company a personal check, either for future deposit or to give that company electronic access to your bank account. Sounds dangerous already, doesn't it?

"Stanley" of Whitehaven e-mailed me to say his mother -- whose only income is Social Security -- is more than $1,000 in debt to six payday loan companies!

Stanley writes:

"She actually has 6 with a total of $1200.00, and she pays $30.00 per month in interest total of $180.00 monthly."

That's crazy!  Stanley's mother has to pay off those loans.

According to the Consumer Federation of America, the average payday loan carries a 470 percent interest rate.  That's worse than cash advances on credit cards.  It's even worse than those refund anticipation loans from those rapid tax refund places. That's insane!

The finance charge is typically $15 to $30 to borrow $100.

Why would anyone do that?

And on top of that, the place has your personal information:  your bank account number, where you live, maybe your Social Security number and electronic access to your funds!

Stanley, you and your family may have to pool your resources and help your mother pay those off -- and I mean fast. That interest is compounding.  There's no way around it except to pay off the balances.

Got a question?  Ask Andy!

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