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Valley Alerts

Protecting Yourself…Against Pay Day Lenders on the Web

You probably have heard this over and over. Read the fine print. If it sounds too good to be true…maybe it is.

In the past few months Pioneer Valley FCU has seen a few members get caught with high percentage rate payday loans. What is a payday loan you ask? Payday loans are usually made to people who need money right away and plan to pay it back with their next paycheck. Payday lenders will use advertising like “Caught between paychecks?”, “short on cash?”, “pre-approved in minutes” and “no credit check” to lure you in. These lenders offer amounts up to $500 for short periods of time, usually 1 – 4 weeks. Now, here’s the catch… If you don’t pay off the loan within the agreed amount time, the lender renews the loan and adds late fees. If you calculate the interest rate based on the fees, you’re paying between 200 and 900%! We have seen the rates go as high as 497.73%. Yes! Almost 500%!

To protect yourself, be cautious of their enticing offers. Many pay day lenders try to rush you through the process. They don’t want you to see the very costly hidden fees associated with payday loans. Once they get your bank account number, they will automatically take the payments out of the account each week. The end result is a spiral effect into more debt.

Ask about any extra fees, costs, or charges! Carefully review the cost of the loan and read "ALL" the fine print in the paperwork.

Be careful of lenders who allow you to borrow up to the amount of your next paycheck. By maxing out your finances, the lender is trying to get you to “rollover” / “rewrite” the loan. This process can continue and the debit grows, for which you need to rewrite the loan before each future paycheck.

The best defense against payday lending is to educate yourself. You can do this through credit counseling, learning everything about the loan process and how it will work before signing anything, finally, ask a lot of questions and read the fine print before putting your signature on anything!