BATON ROUGE, La. (WAFB) – As we see the highest inflation in four decades, you’re trying to break the bank, but financial experts are encouraging any way to pay bills except a payday loan.
A payday loan might sound great since it’s basically instant cash when you need it, but with an average interest rate of 391 percent, this quick cash can put you on an arduous debt journey.
For comparison, the APR on credit cards can range from about 12% to about 30%. If the loan is not repaid in full on the first payday, a fee is added and the cycle repeats.
This allows borrowers to owe more interest than the original loan amount within a few months.
“So you can really get yourself into a cycle of debt because you have so much to pay back,” said Andy Mattingly of Forum Credit Union. “Then you just keep borrowing something every week or couple of weeks. So you can just get into that cycle and you can’t get out of it.”
Payday loans are typically short-term, high-interest loans that typically mature on the next payday. Experts say this should be your absolute last resort and even personal loans are a better choice.
Personal loans work in some emergency situations, such as B. a car repair that costs a few thousand dollars. With personal loans, you may have 12 to 24 months to repay the loan. Consider going through a credit union for low-interest loans.
Or think about a part-time job or a temporary second job. Every little counts when trying to manage your money and grow your income.
“There’s an actual problem that needs to be solved, and this extra income for two months, one month can actually solve that problem,” said Peter Dunn, CEO of Your MoneyLine.
To be proactive, try to keep your spending to a minimum right now, especially if your budget is already pretty tight. You may be tempted to make these impulse purchases at retail stores that offer reasonable sales on clothing and furniture. If you don’t need it, don’t buy it.
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