Loans usually carry high interest rates, which could trap the borrower in a cycle of indebtedness.
TAMPA, Fla .– As stimulus talks stagnate, more Americans are desperate for financial relief, and local experts say this is leading many to rely on payday loans to make ends meet.
These loans often have high interest rates and can trap borrowers in a deep debt cycle.
“It took me a lot longer than expected to pay it off,” said Eckwood Ellison, artist from Pinellas County.
Payday loans are best known for providing quick, short term cash – often obtained without a credit check. They usually have to be paid off within a few weeks, but the price is outrageous.
According to Center for Responsible Lending, The average Florida payday loan carries an interest rate of over 300% and can go even higher.
“The money you would normally have spent on a rent or a car loan now has to be used for that extra bill that never really gets paid – just cycles, every week,” Ellison said.
He knows it well. The Pinellas County artist relied on those loans to make ends meet amid the pandemic when no other lender would help.
“You can hit your next pay period, but that doesn’t really solve the problem. We need solutions at a time like this,” Ellison said.
However, with the stimulus talks stalled in Washington, it’s unclear whether relief will come anytime soon.
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“It has become a trend as federal and state economic aid has declined,” said attorney William Pena Wells of Gulfcoast Legal Services.
It’s a trend lawyers say is also true for the Tampa Bay area.
“People who might normally be dependent on that next paycheck that isn’t there have to find another alternative to make ends meet,” said Pena Wells.
Yet before signing up for that money, experts recommend researching alternative options first.
“Talk to your creditors. Explain to them, make payment plans, try to do something that won’t put you in more debt,” said Pena Wells. “Try borrowing it from family or friends, try going to your credit union or a bank or other reputable financial institution.
“Anything you can think of to do to avoid the quicksand of payday loans …”
$ 500 is the most you can borrow in Florida on a payday loan, but with the high interest rates and short repayment term, experts say that’s enough to keep you in a cycle of debt.
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