Thursday, 03 May 2012 08:44
By Blake Krier
It is not uncommon during these tough economic times to come up a little short at the end of the month. You may need just a little more to carry you over to that next paycheck. A simple solution seems to be to go and take out a payday loan.
These loans have increased in popularity in the past years as they are convenient and easy to take out. They are small loans, no more than $500 in the state of Kansas, that will carry you over until your next paycheck. While payday loans are advertised as a quick, short-term fix, people often don’t realize the extremely high interest rate charged.
The annual percentage rate on payday loans can be as high as 1,000 percent. The state of Kansas limits the APR to 390 percent, but that is still much higher than a loan from a credit union.
Payday loans work with fees per $100 borrowed. The customer writes a check post-dated for the amount loaned plus the fees. For example, if you borrowed $100 with $15 in fees, you would write a post-dated check for $115. When the loan comes due, the payday lender will cash the check, or the borrower can renew the loan by paying an additional $15.
These rates are much higher than what would be found at a federally-chartered credit union, which are limited to an 18 percent APR. So instead of paying $15 for two weeks, a borrower would pay $18 or less in finance charges for the entire year.
Check with your credit union to see if they can help you before taking out a payday loan. They will be able to offer some guidance on how to help get through the difficult times and give you lower rates.
Krier is an employee of Catholic Family Federal Credit Union at 717 N. Socora in Wichita. Contact CFFCU at (316) 264-9163.