The dangers of pre-holiday payday loans
COLORADO SPRINGS, Colo. (KRDO) – With one week to go, 62% of Americans shop in the seven days leading up to Christmas and 15% sell goods to pay for those freebies.
This means that thousands more are taking out short term payday loans with high interest rates.
Payday loans are often a must-have for many families, especially at this time of year.
“Check in Cash” on Academy Blvd. is just one of several short term loan companies in Colorado Springs. Many more can be found in working-class areas of the city.
According to the lenders, the loan amounts are capped at $ 500 and they are quite easy to obtain. All you need is an active bank account or prepaid card account, along with proof of income and valid ID.
So what’s the catch? Edward Van Wesep, associate professor of finance at UC-Boulder, explains that payday loans used to carry a high interest rate of over 200%.
That’s why Colorado voted last year to eliminate all payday loan fees under Proposition 111. Now there is a fixed interest rate of 36%.
If you are in a tough spot this time of year and are considering a short term payday loan, keep in mind that borrowing $ 300 could turn into debt of over $ 1,000 in the next few months. six months.
Van Wesep says that as a researcher who has studied payday loans, he believes there are many new alternatives to short-term, high-interest loans.
He says many companies give workers access to their wages at little or no cost, as they are earned, and work with apps like PayActiv, which gives workers access to real-time wages.
For example, he says if you earn $ 75 per day then you can withdraw that from your account or pay bills directly from that account immediately.
He says apps like PayActiv have reduced the number of loan agency storefronts in Colorado.