Consumer Reports: Alternatives to Payday Loans
If you are having trouble paying your bills, you might want to consider a payday loan. But beware: even with some recent reforms, many of these loans still come with high fees and very high interest rates. The good news: There are alternatives – and as Consumer Reports explains, you just have to know where to look.
Missy Juliette was struggling to pay her rent and overdue utility bills. As a last resort, she turned to payday lenders.
As Missy says “I had run out of credit cards and already asked my family for help with
passed, so I couldn’t go see them anymoreâ¦ I was embarrassed.
Missy borrowed $ 730 in two separate loans. One of those loans had a whopping 266 percent interest rate, and she struggled to repay them.
And unfortunately, for millions of people like Missy who are in need of emergency cash fast, payday lenders are truly one of the few options available. – But that may soon change.
Brian Vines, Consumer Reports investigative reporter, said, âThe pandemic has really exacerbated the problems with payday lenders, especially in low-income and black communities. So what we have seen is this push to provide better and fairer banking services to these communities. “
What can you do now if you need emergency cash quickly? First, try to find a community development financial institution near you.
âCDFIs are financial service providers, like a bank or a credit union, whose mission is to bring financial services to low-income communities, places that many traditional banks have largely excluded. – Brian Vines, Consumer Reports investigative reporter.
Joining a CDFI can be affordable – offering free or low cost banking services with
an initial deposit as small as $ 25.
Another avenue that you can take is to find a nonprofit organization with a payment relief program. That’s what Missy ultimately did, enlisting the help of Exodus Lending, a nonprofit dedicated to helping people get out of payday loan debt. They consolidated his loans with no fees and no interest.
Missy is in better financial shape. “So instead of $ 50 to $ 200 in fees per month, I’m making an interest payment of $ 80 per month per year, and that has helped me a lot.”