Payday Lending

A payday loan is a short-term, high-interest loan that is generally due on your next payday, hence the term. These loans are usually taken out by consumers who need quick cash.

Problems With Payday Loans

Payday lenders take advantage of consumers who need quick cash for emergencies.

When you take out a payday loan, you're typically paying 300% interest or more, which is significantly higher than a 24% credit card and still higher than a 50% cash advance rate on credit cards. Compounding the matter, many consumers roll the loan into another payday loan, and then another. A $300 cash advance may cost you $42 with a cash avdance over three months on a credit card. By contrast, that same amount on a payday loan can cost you $1000 or more, assuming that you don't have any fees for missing a payment.

NCCC helped shut down the payday loan industry in North Carolina in 2002. But the Internet has helped them to make a comeback. Some payday lending operations are still conducted, though illegally.

Alternatives to Payday Loans

Even in a true emergency, there are other options.

Ask your bank for an authorized overdraft, charge a credit card, turn to family and friends, or visit your local credit union. Credit unions often have great short-term loan options with competitive interest rates.