Published: May 17, 2007 07:29 pm         

Payday loans not always what they seem

The editor:

We all love money and would love to have more of it. The idea of borrowing money just to pay back only a few dollars more than you borrowed is ideal. As part of a class project we were asked to do some research on payday loan and check cashing services.

Payday loan and check cashing services, in any community, provide the opportunity for any individual to borrow money. In an emergency situation a payday loan or check cashing service is wonderful. Knowing there is a place to go when you need quick money is a comfort. However, are you comfortable knowing how you are going to pay it back? Not only do you have to pay back all the money you borrowed but there are also fees such as interest, user fees/borrower fees, and late fees. Interest rates or APR’s can be more of a problem for most users than the actual borrowing. Payday lenders count on people to borrow money and then not pay it back on time. This is how they make their money. Borrowers are asked to sign papers indicating that they understand the terms of the loan; however, most of the information and contracts found during our research were written at a college graduate reading level. The average American reads at a 6th-8th-grade level. People borrow and leave believing they only have to pay back a few dollars over the borrowed amount. If the person doesn’t make the payment on time, the payday lender can charge as much as 390 percent interest! If you are not certain you can pay on time, every time, a payday lender may not be the answer for you. While emergency situations are one of the best uses of a payday loan/check cashing business according to the Center for Responsible Lending 91 percent of borrowers are repeat borrowers.

In 2005, 5.6 percent of Rowan County’s population was unemployed and the average weekly wage was $518 dollars; the national average was $782! While the average weekly wage was only $518, according to The Center for Responsible Lending the average payday borrower pays about $800 to borrow $325. Does it really make sense to give a population where the poverty level is high an opportunity to borrow money where they potentially couldn’t ever pay back what they borrowed?

What if payday loans are not right for you but you still need financial help? There are some other options to explore right here in the Morehead city limits. There are Home Energy Assistance Programs, Food Stamps, Christian Social Services, Financial Counseling, and Child Care Assistance Programs. You can find information in places around Morehead such as local churches, the Rowan County Health Department, and at the public library.

While you may still be considering using a payday loan or check cashing service please use with caution. These types of businesses are illegal in fourteen states. They are illegal because the law is trying to protect its citizens and its local economy. Payday loan and check cashing services may be and probably are wonderful in a time of emergency. They can get you quick money in a time of need but should still be pursued with caution. Make sure you get the facts before you borrow! If you do not understand something you are about to sign, ask! The small print can explain a lot and possibly save you hundreds of dollars! Ask questions, shop around for different options, and don’t be afraid to ask for help!



MSU Consumer Health Class (HLTH 430)