A payday loan can help cover expenses, but it can also end up costing you money.
SAN ANTONIO – Many of us are in a different employment situation because of the pandemic. Many of us struggle to figure out how to cover rent, food and utilities. That means sometimes having to make tough choices at the end of the month.
We always struggle after getting personal loans, using our credit cards, or getting a cash advance. Payday loans might have to be an option. Just be aware that they are an expensive way to get money. The Federal Trade Commission warns that they charge interest rates of up to 700%.
You need the money to cover a few weeks of expenses until you get paid. So you get a short term loan and plan to pay it off when you get your paycheck.
Realize that people are rarely able to get and pay off one loan and pay it off. The loan can be difficult to repay once you add the interest and fees. You will likely have to roll over the loan for another two weeks. Now you have more interest and more fees. You can end up paying thousands of dollars for a $ 500 loan.
For example: you need $ 500. You give the lender a check for $ 580 which will be held for two weeks until you are paid; $ 500 for the loan, $ 80 for interest and fees.
In two weeks you have no money, so you give the lender another $ 80 for two more weeks to pay off the loan. Again, you don’t have the money and pay $ 80 more. It takes you 12 weeks, or about three months, to save the money to pay off the loan. It ends up costing me $ 480 in fees and interest on a $ 500 loan.
Make sure you read the loan terms carefully. Calculate how much you’ll have to pay if you can’t pay off the loan in two weeks. Find out if a payday loan will help or hurt you financially
If you have a question for Eyewitness Wants To Know, email us at EWTK @ KENS5, com or call us at 210-377-8647.