Payday Loans Add to Your Worries and Conflicts

Digging into financial maneuvers that seem suspicious.

Payday loans are predatory products that people in financial difficulty often resort to in a pinch. Also called cash advances, these short-term loans are primarily used to cover basic living needs like utilities, car payments, credit card payments, housing, and food.

How are these products predatory? First, average interest rates vary from state to state, but rates are usually so high that borrowers fall into a debt trap. Texas, for example, has the highest average APR of 664% (well above the 36% APR cap defenders have claimed in a number of other states). This means that a borrower who needs $300 to cover their rent would have to pay back $1,992, which is often paid off by taking on more debt.

Second, payday loan ads disproportionately target Black and Latinx populations, and cash advance locations tend to be clustered in low-income areas. Enough said.

So while we strongly advise against payday loans at all costs, here’s what to do if you or someone you know is having trouble escaping this cycle:

• Get help with debt management through the National Credit Counseling Foundation. (You may have to pay a small fee for the service, but it’ll be money well spent.)
• Focus on a debt avalanche approach paying off the debt at the highest interest rate first.
• Connect with your local support group for cash assistance or help paying for groceries.
• Negotiate your expenses As talk to your landlord if you think you are behind on your rent. Call your credit card companies to see if you can change your payment due date.

It is important to remember that payday loans are the result of societal failures, not individual ones. And both the private and public sectors are working to eradicate this predatory practice: organizations like the Center for Responsible Lending are working to end predatory lending, and more than 16 states have banned payday lending entirely.-Myriam