Payday Loans Might Be Even Worse Than You Thought

What's Hot


2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

The Consumer Financial Protection Bureau is preparing some new rules to reform the payday loan industry.

Beware of payday loans.

A new report by the Consumer Financial Protection Bureau finds that more than 60 percent of payday loans are made to people who end up extending the loans several times. In the end, borrowers end up paying more in fees than the original loan amount.

And 4 out of 5 payday loans, also known as cash advances or check loans, are rolled over for an additional fee or followed by another loan within just two weeks, USA Today reports.

CFPB press release says:

“This comprehensive study shows that payday and deposit advance loans put many consumers at risk of turning what is supposed to be a short-term, emergency loan into a long-term, expensive debt burden,” said CFPB director Richard Cordray. “For too many consumers, payday and deposit advance loans are debt traps that cause them to be living their lives off money borrowed at huge interest rates.”

Bloomberg Businessweek said that after factoring in fees, interest rates on payday loans can skyrocket to 521 percent on an annual basis, and leave borrowers in a perpetual state of indebtedness. (See: “Big Banks Are Dropping Their Payday-Type Loans.”)

The CFPB is drafting new rules to reform the payday loan market, which is definitely a step in the right direction. Cordray said that payday loans should help borrowers get ahead, “not push them farther behind.”

The payday loan industry claims that the loans are meant to be an effective service to help people to manage temporary or unexpected financial challenges.

My first TV reporting job after graduating from college paid $6 per hour, just above minimum wage at the time, so I lived precariously from paycheck to paycheck. If any unexpected expense arose, like my brakes went out or I needed new tires for my car, I took out a payday loan to help cover the extra expense.

But I quickly discovered that paying the interest on a short-term loan left me with no money after my next paycheck, and then I’d have to take out another payday loan just to cover my basic expenses. It was a vicious cycle, so I’m thrilled to see the feds taking a closer look at these predatory loans.

Do you have any experience with payday loans? Please share them below or on our Facebook page.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!

💰🗣📰

Read Next: 50 Ways to Make a Fast $50

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 2,006 more deals!