(InvestigateTV) — The lure of needing just a little extra cash until payday tempts many to turn to payday loans—but the financial consequences can be far more expensive than expected.
A payday loan is a short-term, high-cost loan, typically for $500 or less. It’s designed to be repaid by your next paycheck but often comes with sky-high interest rates and hidden fees.
Leslie Tayne, a debt relief attorney, said these types of loans can sound good, but ultimately, can be very challenging for the borrower.
“In some states they aren’t legal and other states they can be disguised at other types of, let’s say, factoring or advance payments,” Tayne shared. “And you can be sucked into that pretty easily because it’s very easy to get those but it’s very challenging to get out of them, meaning you have to have the money to pay them back.”
She said those that are already short and borrowing money this way have a high likelihood to be left in a vicious cycle they can’t escape.
“There’s are lots of other ways to avoid getting a payday loan,” she explained. “One is of course taking a look at your budget, trying to figure out where the shortfall is. Cutting back or adding income to your lifestyle. Even if it’s part time or gig work or contractual work.”
Tayne said be careful before signing up for a loan like this. Read the fine print of the contract.
She said the need for a payday loan is showing a cash flow issue, which needs to be addressed. She added that sometimes using a credit card in the short-term is a better option than taking out a loan like this.
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