Pay Day Loans. Buyer Beware….. “Get cash until payday!” “You can get $50 to $500 within 15 minutes!” “Get cash….$100 or more….fast!”

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Presentation transcript:

Pay Day Loans

Buyer Beware….. “Get cash until payday!” “You can get $50 to $500 within 15 minutes!” “Get cash….$100 or more….fast!”

What is a Payday Loan? A small, unsecured, high interest, short-term cash loan. A small, unsecured, high interest, short-term cash loan. In most cases, consumers write a post-dated, personal check for the advance amount, plus a fee. In most cases, consumers write a post-dated, personal check for the advance amount, plus a fee. The lender holds the check for the loan period and then deposits it, or the customer returns with cash to reclaim the check. The lender holds the check for the loan period and then deposits it, or the customer returns with cash to reclaim the check. Examples: Examples: Check Masters Check Masters Money Tree Money Tree Check Into Cash Check Into Cash Pawn Shops Pawn Shops Also known as: Also known as: payday loans, cash advance loans, check advance loans, post dated check loans or deferred deposit check loans. payday loans, cash advance loans, check advance loans, post dated check loans or deferred deposit check loans.

Payday Loans are a 1.3 billion dollar industry Payday Loans are a 1.3 billion dollar industry They are relatively simple and easy to get, especially if you only need the money for a short time. They are relatively simple and easy to get, especially if you only need the money for a short time. And they can get DANGEROUS…. And they can get DANGEROUS….QUICKLY….

Let’s do the math….. You borrow $100. They charge $18. Your payment is due in 2 weeks. What is the percentage charged for two weeks?

Interest for two weeks….. 18%

What is the APR? 18% for a 2 week loan 52 weeks in a year 18% x 26 = ?

APR …….. 468% Say what???

Not to mention…  What happens if in two weeks you don’t have the $118 to pay back???  And you take out another loan to cover the first?  What is going to start happening?  CYCLE OF DEBT – extremely difficult to dig yourself out of!

Lets Compare! Personal Line of Credit 9-18% APR Credit Cards 9-40% APR Payday Loans % APR

Alternatives to Payday Loans  Shop carefully for credit – compare APR  Consider a small loan (personal line of credit) from a credit union  Contact creditors for more time to pay bills  Make a realistic budget

Is anyone doing anything to limit these crazy pay-day loan companies???  Changes Effective January 1, 2010 New! You may only borrow a total of $700 or 30% of your gross monthly income, whichever is less. You may only borrow a total of $700 or 30% of your gross monthly income, whichever is less. Your information will be registered in a state-wide database, ensuring that all payday lenders have your most up-to-date loan information. Your information will be registered in a state-wide database, ensuring that all payday lenders have your most up-to-date loan information. You may only take 8 payday loans per 12-month period. You may only take 8 payday loans per 12-month period. If you are unable to repay your loan before your loan is due, you may request an installment plan with no additional fees. If you are unable to repay your loan before your loan is due, you may request an installment plan with no additional fees. If you currently have an installment plan you may not receive another loan. If you currently have an installment plan you may not receive another loan. Lenders may not harass or intimidate you when collecting a loan. If you are harassed, contact DFI and file a complaint. Lenders may not harass or intimidate you when collecting a loan. If you are harassed, contact DFI and file a complaint.