First Person: A Payday Loan Cost Me 133% in Interest and Fees
*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you’d like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
Whether on the radio, on the television or in print, advertisements for payday loans run rampant. These loans promise everyday people the chance to take an advance on their future earnings so they can pay what needs to be paid for now. However, these “savior” loans can turn out to be anything but and in my case a loan of only $300 ended up costing me over 133% in interest and fees.
No Other Option
At the point in my life where I had to take a payday loan I was only making around $300 per week. This was barely enough for me to pay my portion of the bills and when my car broke down I needed to find the money to pay the mechanic to fix it. With no credit and what I felt was no other option, I looked into a payday loan.
Easy Money
I was almost in shock at just how easy it was to get a payday loan. I went into a place that was near the apartment that I rented at the time and all they asked for was my identification, proof of my job and proof of a checking account. Just like that I walked out of there with $300 in my pocket and I was able to get my car fixed. They didn’t even run a credit check on me.
The Pay Back
In hindsight I really should have looked at what I was signing. Lo and behold the interest on that $300 loan was an astounding 30% and when it came time to pay the loan I didn’t have the money. The payday loan place I used told me I could pay a “rollover” fee and wait another month to pay off the loan. The fee was $100 and I had to pay it or they would go into my bank account.
A Mountain of Interest and Fees
After paying the rollover fee for three straight months I finally borrowed the money I needed to pay off the loan from a family friend. In the end I paid the $300 of the original loan amount, $300 in rollover fees and around another $100 in interest. So, just to borrow that $300, cost me over $400 in interest and fees.
Never Again
My payday loan experience was back before there were certain rules and regulations that were put in place by lawmakers and today’s standards are far different. I’m not saying that I was ripped off in any way and the place I used was really only honoring my wishes, but I personally would never again take out another payday loan. While my situation was bad, had it not been for a close family friend, it may have been a lot worse.
More from this contributor:
Avoiding Those Costly and Annoying Bank Fees
First Person: The Importance of Creating a Rainy Day Fund
Smoking and Drinking Coffee Can Make You Go Broke
Article source: http://finance.yahoo.com/news/first-person-payday-loan-cost-133-interest-fees-044000305.html
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
No comments yet.
Leave a comment