With emergency cash nonexistent for many, more consumers are turning to payday lenders as an alterative resource for money.

Payday loans do not require a credit check to borrow money. Since payday loans carry a huge risk to the lender, payday lenders charge larger fees and higher interest rates than a traditional loan. A typical interest rate on a payday loan is 400 percent or above. A study released in January from The Financial Stability Partnership found that in Nebraska, a typical borrower will pay about $800 after fees and interest for a $300 loan. Many consumers who use payday loans will use one to pay off another.

It is important to consider all options available when emergency money is needed. A person could:

• Borrow money from a family member or a friend.
• Speak to a certified credit counselor about financial options.
• Find a local bank that provides small loans (some are starting to offer this service).

“No matter what option you choose to help you out of a tight financial spot, make sure you do your research. Do not borrow any money or receive help from any organization before you know if they are reputable. Check with your Attorney General or the Better Business Bureau,” said Lisa Cameron, Director of Education at Credit Advisors Foundation.

Many states have already laws to limit payday lenders; Ohio and New Hampshire are recent examples. Ohio capped the amount of interest a payday lender can charge at 391 percent. New Hampshire made it illegal for payday lenders to operate in their state.

For more information on this topic please contact one of our certified credit counselors or your Account Manager.