BATON ROUGE, La. (WAFB) – As we see the highest inflation in four decades, you’re trying to stretch your budgets, but financial experts recommend any option to help pay the bills except a payday loan.
A payday loan may sound great, since it’s basically instant cash when you need it, but with an average interest rate of 391 percent, that quick cash can set you on an onerous debt trip.
For comparison, credit card APRs can range from 12% to 30%. If the loan is not paid in full on the first payment day, a fee is added and the cycle repeats.
So, within a few months, borrowers may end up owing more interest than the original loan amount.
“So you can really get into a cycle of debt because it’s too much to pay,” said Andy Mattingly of Forum Credit Union. “So, you’re constantly borrowing every week or every other week. So, you can just get into this cycle and you can’t get out of it.”
Payday loans are generally a short-term, high-interest loan that is usually due on your next payday. Experts say these should be your absolute last resort and even personal loans are a better decision.
Personal loans work for some emergency situations, like a car repair that costs a couple of thousand dollars. With personal loans, you have between 12 and 24 months to pay off. Consider going to a credit union for loans with low interest rates.
Or consider thinking about a side job or a temporary second job. Every little bit counts when you’re trying to manage your money and increase your income.
“There’s a real problem that needs to be solved and that extra income for two months, one month can really 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 those impulse buys at retail stores that offer decent sales on clothing and furniture. If you don’t need it, please don’t buy it.
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