The Federal Government has issued new terms regarding payday loans. These loans can now get issued without the Lender checking to see if the person borrowing the money can repay it. With the Federal Government's new rule, payday loan lenders will be able to give out loans at a much higher-interest rate, ultimately setting consumers up for failure if they can't repay them. Here's what you need to know about payday loans and the Federal Government's changes to them:
1. What Is A Payday Loan
A payday loan is a short-term loan, with a high interest rate, generally for $500 or less. They are used to cover immediate expenses until your next payday. In general, this loan is due, in one payment, the next time you are paid. The lender doesn't consider whether or not you are able to repay the loan making them very risky.
2. Why They Are Harmful
If you're already in financial trouble, taking out a payday loan could only make a bad situation worse. What ends up happening is consumers keep chasing their debt by taking loan after loan out to cover their expenses. In fact, 80% of payday loans were either extended or followed by another payday loan within two weeks. Even with the negative financial consequences, it's estimated that 12 million Americans use payday loans each year to help them cover immediate expenses until their next payday.
3. Recent Changes In The Law
As of July 7, 2020, The Consumer Financial Protection Bureau shared their final ruling that allows payday lenders to give out high-interest loans to consumers who may not be able to repay them. The rule states that payday lenders no longer need to check if someone is eligible for a loan or has the capabilities to repay a loan. As a result, consumers are at financial risk for qualifying for payday loans that will put them in financial trouble.
4. Other Options For Loans To Cover Unexpected Costs
The good news is a payday loan is not your only loan option. Instead of getting a payday loan, consider getting a personal loan. A personal loan will help you cover urgent expenses without ever having to get a payday loan. At Coastal, we can provide a personal loan for you for anything you can imagine. With competitive rates to help you save money on interest and flexible financing terms that can be adjusted to fit your budget, a personal loan is the perfect option for any consumer.
If you are not eligible for a personal loan, you can contact an expert at GreenPath, to talk through your finances. We've partnered with GreenPath Financial services to provide you free access to debt management services, free one-on-one financial counseling and financial education tools.
If you feel as though a payday loan is your last resort to making ends meet, think again! Thankfully, there are other options that can help you pay your bills and get you through tough financial times. Remember to do your research and speak with a financial advisor to help you make the best financial choice for you and your circumstances.
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