Payday loans are short-term cash loans based on the borrower’s personal check held for future deposit or on electronic access to the borrower’s bank account. Borrowers write a personal check for the amount borrowed plus the finance charge and receive cash.
If you ever find yourself in an emergency where you need some extra money fast, a payday loan might seem like your only option. But these loans can be outrageously expensive. Common predatory lending practices include:
- Failure to disclose information.
- Disclosing false information.
- Risk-based pricing.
- Inflated charges.
The majority of borrowers who use payday loans are low-income individuals making less than $30,000 per year who fell behind on their monthly expenses, including rent, utility bills, or car payments, according to the Consumer Financial Protection Bureau. Many are unemployed.Jun 18, 2020
The average payday loan is less than expected. The median loan amount is $350 with an average of $392. Quite a few states have even capped the loan principal at $500. However, the real money that captures borrowers in the viscious payday loan cycle comes from fixed fees and high interest rates.