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Think long-term savings
as deterrent to payday loan
By Michelle
Samaad • Bankrate.com
It's not difficult to empathize with the single
mother who must buy medicine for her sick child. Or the father of
a large family whose car just broke down for the fourth time. Desperate
situations call for desperate action. The key may be, as attorney
John Ventura suggests, changing one's condition rather than existing
from paycheck to paycheck.
"By no means am I suggesting everyone's situation
is the same," Ventura says, "but by looking at the your condition
from a broader view and making the decision to go back to school,
it may alleviate the mischance of having to taking out a payday
loan (in the first place)."
The Consumer Federation of America offers these
alternatives:
- Make a realistic budget and build a nest
egg of savings to avoid the need to borrow small sums to meet
emergencies and unexpected expenses. Just $300 in a savings account
would save payday loan borrowers the steep fees.
- Shop for the lowest cost credit available
from cash advances on credit cards, small loans from a credit
union or a small loan company. Consider asking your employer for
an advance or turning to friends or family when an emergency arises.
Put in writing a good faith agreement to pay them back by a certain
date.
- Some community-based organizations may make
small business loans to individuals.
- Ask for more time to pay utility bills.
- Compare both the annual percentage rate and
the finance charge to get the lowest cost credit. Do not simply
compare the payday loan fee with a bank bounced-check charge.
- Consider overdraft protection for your checking
account.
- If payday loans are the only alternative,
borrow only an amount that is affordable, enough that can be paid
with the next paycheck and still have money left to live
on for the next few weeks.
-- Posted: Dec. 15, 1998
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