Last year, I counseled a young mother of two small children who came into our community program distraught, nearly hysterical, and on the verge of divorce. What was the issue? Payday Loans. She and her husband were both working, but she came in for assistance because she had absolutely nothing in the cupboard to feed her kids for the next two weeks until a clear paycheck came in. The other checks were tied up in Payday Loans.
While you may think this is a rare occurrence, sadly it isn’t. In my experience many families are falling into the trap of a promise for cash now and paying later – especially around Christmas time. We’ve all heard that Payday Loans are a poor financial decision, and if you ever take the time to read the small print on one of these loan contracts you might be tempted to take a torch to the building or stand guard outside the door and urge potential customers to run for safety. They really do gouge the consumer to the hilt. Yet these businesses are thriving. In one town near my home, two new Payday Loan offices have moved in over the last year, bringing the total up to four loan centers in a town of about 11,000 residents.
These centers deploy various tactics to draw customers in like flies to the mouth of a Venus Flytrap, but they all rely on the “urgency” of needing (or wanting) cash quickly. The signs tout, “Quick and easy loans, EZ Cash in 15 minutes or less, No Hassle Loans” and similar slogans. “Kmart has that patio set and chrome gas grill on sale but you don’t have the cash? No problem – you can take it home today with a Payday Loan. In two weeks time, your check will clear and no one will ever be the wiser. We’re fast – and discreet.”
What they don’t tell you is that Payday Loans can be painful, especially when it becomes a habit or when you hide the loans from your spouse. This young couple did recover financially, but they had the help of a free community program to cover them for a couple of weeks worth of groceries and several months of counseling – both couples counseling and financial counseling. Not many couples are so fortunate.
If you’re considering a Payday Loan, here are a few alternatives to ponder first.
- Examine if the purchase is a need or a want. If you need the money to keep your heat on, the loan may be necessary. If it’s a loan to fund a weekend trip or a purchase that can wait, Payday Loans are never a good idea.
- See if you can work out a payment arrangement with your creditors that will allow you to avoid taking out a Payday Loan.
- Visit your local food bank, community outreach program or church to see what assistance is available.
- Go through your house and gather unused, unwanted, or valuable items. Hold a yard sale, visit a resale shop or pawnshop, or sign up for eBay to make some quick cash from items you don’t need.
- Get a side job. Babysit the neighbor’s children, clean an elderly man’s house or offer to do yard work for extra cash. You can write articles for Squidoo, Hubpages, or Helium for a few buck a pop. Sign up to be a virtual assistant in your spare time, or look for freelance work in whatever field you have applicable skills. Even in a crappy economy there’s work to be found. The pay may not be spectacular, but if you’re determined to feed your family or pay your bills on time, it’s a small sacrifice until you can improve your situation.
- Go back to school. If your current salary is not enough to pay your bills, you either need to reduce your lifestyle or make more money. If you qualify for a grant or financial assistance, your scholarship or grant money can be used for education costs as well as the cost of supporting yourself while you attend school.
- Suspend your cable TV, cell phone or Internet service, and cut back on expenses wherever possible. If you tighten your budgeting belt, you might be able to squeak by without getting another Payday Loan. (Here are a few more ideas on trimming your cable tv costs.)
- Take a financial management class. Learn more about personal finance and get some ideas or personal counseling about what options are available to you and what you can do to improve your financial situation.
You don’t have to suffer through a financial crisis alone. Get help and support from your friends and family or seek out the advice of others who have struggled financially.