Avoid payday loan traps
Before taking a payday loan, compare the total cost, repayment date, and alternatives so a short-term cash gap does not become long-term debt.
Costsfree · a few hours · long-term effort
Getslarge money benefit
EvidenceA
Last checked
What it costs
Time to compare the loan's total cost and repayment terms. Avoiding a payday loan can also mean finding another way to cover the short-term expense.
What you get
The CFPB says a $15 charge per $100 borrowed is common and equates to an annual percentage rate of almost 400 percent for a two-week loan. For example, borrowing $300 at that fee costs $345 to repay.
Notes
Read the total dollar cost and the date the payment is due before agreeing. If the terms are unclear or repayment would require another loan, pause and look for a lower-cost alternative.
Sources
- Consumer Financial Protection Bureau — What are the costs and fees for a payday loan?