In today’s society, the majority of Americans hold one type of loan or another. From home loans to car loans to student loans to quick cash loans, consumers are in debt to someone, and they are paying a lot of interest.

Consumers who hold student loans will soon be paying a lot more interest. As of July 1, 2006, interest rates for student loans are expected to increase up to 40%. Students who can consolidate their student loans while in their grace period may receive a fixed rate as low as 4.75%, while students already in repayment may receive 5.375%. Current student loans are at a variable rate with an 8.25% cap. What is not known about student loans is that they are the only consumer loans in America where it is almost impossible to refinance more than once. If you currently hold a student loan with high interest rate and haven’t consolidated or refinanced, now is the time to do it. Quickly.

Another type of loan that has increasingly high interest is a payday loan. “Payday lenders” offer quick, short-term loans to people who are looking for quick and easy cash to help them with bills until their next paycheck. Unfortunately, while this service may seem relatively harmless, it may hurt the people who already are in financial trouble by preventing them from resolving the problems that got them into financial difficulty in the first place.

The payday loan industry is a very lucrative business, especially with the high interest rates. A consumer may not even notice the high interest rate because the loan is set up as a two-week loan, so the interest is just a dollar amount added to the loan amount. For a $100 loan, $15 in interest will be added. What consumers don’t realize is that the $15 interest equals a 391% APR.

According to the Federal Trade Commission (http://www.ftc.gov/bcp/conline/pubs/alerts/pdayalrt.htm), there are options that should be considered before choosing a payday loan:

• When you need credit, shop carefully. Compare offers. Look for the credit offer with the lowest APR - consider a small loan from your credit union or small loan company, an advance on pay from your employer, or a loan from family or friends. A cash advance on a credit card also may be a possibility, but it may have a higher interest rate than your other sources of funds: find out the terms before you decide. Also, a local community-based organization may make small business loans to individuals.
• Compare the APR and the finance charge (which includes loan fees, interest and other types of credit costs) of credit offers to get the lowest cost.
• Ask your creditors for more time to pay your bills. Find out what they will charge for that service - as a late charge, an additional finance charge or a higher interest rate.
• Make a realistic budget, and figure your monthly and daily expenditures. Avoid unnecessary purchases - even small daily items. Their costs add up. Also, build some savings - even small deposits can help - to avoid borrowing for emergencies, unexpected expenses or other items. For example, by putting the amount of the fee that would be paid on a typical $300 payday loan in a savings account for six months, you would have extra dollars available. This can give you a buffer against financial emergencies.
• Find out if you have, or can get, overdraft protection on your checking account. If you are regularly using most or all of the funds in your account and if you make a mistake in your checking (or savings) account ledger or records, overdraft protection can help protect you from further credit problems. Find out the terms of overdraft protection.
• If you need help working out a debt repayment plan with creditors or developing a budget, contact Credit Advisors Foundation.
• If you decide you must use a payday loan, borrow only as much as you can afford to pay with your next paycheck and still have enough to make it to the next payday.

Student loans may be necessity for those going to college, and payday loans may help consumers who are in a tight fix, but we must all remember that these loans come at a cost - some types with much greater costs than others. By looking to consolidate debt with lower interest rates and thoroughly understanding short-term loans, consumers will be on a better track to make effective debt management decisions and take control of their finances.