Payday loans are short-term, high-interest loans typically meant to be repaid on your next payday. If you’ve ever needed a payday loan, you probably know that some of their practices are predatory. Still, 12 million Americans take out payday loans annually. These loans often take advantage of individuals who are in a financial pinch and need money fast. Interest rates are astronomical, and missed payments can lead to financial ruin. So, it’s not surprising that there are many horror stories out there. Here are eight stories that we couldn’t believe are even legal.
1. College Student Misses 500% APR
One college student took out a $100 loan to pay for essentials during finals week. Unfortunately, the APR on the loan was 500%. The student didn’t read the terms of the loan. Payment was missed by one day, and the student owed $500 plus a $50 late fee.
2. Teacher Goes into Debt
According to NBC, one day, Jennifer Williams borrowed $200. Years later, she was still struggling to escape debt that she called “quicksand.” It took her 6 years to pay off her payday loan debt. She did this with the help of a local bank that offered financial literacy classes. At the end of the classes, she was offered a low-interest loan to pay off her debt.
3. Six Loans at a Time
Sandra Harris was in a tough time, and she turned to payday lending. After several rollovers, Sandra’s first loan was due in full. She couldn’t pay it off, so she took a loan from a second lender. Sandra eventually found herself with six simultaneous payday loans. She owed over $600 per month in fees alone, which wasn’t applied to her debt. Sandra was evicted, and her car was repossessed.
4. Single Mother Struggles
Lisa Engelkins, a single mother making less than $8 an hour, paid $1254 in fees to renew a payday loan 35 times. Lisa thought she was getting new money each time. In reality, she was only borrowing back the $300 she had just repaid. She paid renewal fees every two weeks for 17 months to float a $300 loan, without paying down the loan.
5. Payday Loan to Afford Medication
Meka Armstrong has struggled in a cycle of debt from payday loans for years. She first took out a payday loan in 2010 to cover the costs of medication she needed for her lupus. Meka said it is the worst decision she has ever made. She said that payday lenders even threatened to sue her and threatened her with jail time for nonpayment. Lenders also have customer’s bank account information.
6. Lying about What is Owed
One individual who took out a payday loan said, “I took out a $1500 loan, wrote two checks for $918. I have paid over $3000 on this. I asked what I need to pay to pay it off, and I was told the check amounts. Went to pay one off and would come back to pay down the other. I was told I had to pay $1300. I don’t have another $400 to add.” The worst part is that lenders can garnish your wages if you are behind on payments.
7. Repayment is Not Considered
Most payday lenders don’t consider whether you can feasibly pay back the loan. In fact, they don’t want you to be able to comfortably afford payments. Then, they make more money. Ed got stuck in this cycle. Ed said he’d been borrowing from various payday lenders for a number of years, and now his monthly repayments were often more than he was earning. He said that he’d complained to the lender about the 50 loans he’d taken out with them, but they said all the loans had been offered responsibly.
8. Communication Isn’t Clear
One individual in Oregon shared their experience with poor lender communication. They said, “I obtained a $300 loan from this company via Money Mutual. Since that time, I have paid a total of $1,295 for a $300 loan. I have no access to my records on their website, and no one at the company will speak to me, yet they continue to debit my account every other week.”
Avoiding Payday Loans
Ultimately, any other kind of loan is better than a payday loan. If you have bad credit, ask a family member or friend for help or see if you qualify for any kind of assistance. You don’t want to get caught in the payday loan debt cycle.
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