Stay Unaffected by Payday Lender Debt Cycle, BBB Says Consumers can easily fall into a debt trap, especially as inflation appears to be eroding purchasing power. Payday loans might be tempting when you’re in the downside of the debt cycle, but your Better Business Bureau (BBB) advises extreme caution. Take a moment to think about how your debt could skyrocket even as you try to defuse a precarious financial problem. For people with credit problems, payday lenders have tremendous appeal. Bank lenders and credit card companies may not be an option, leading you to turn to payday loan quick fix. However, these loans come with enormous costs. Your sky-high interest rates can force you into a cycle of continually renewing that loan, paying new fees every two weeks, and digging a deeper and deeper hole. Video ads for these lenders are now appearing on TikTok, trying to reach a new, younger audience. The loans should look cheap and easy. Claims are often dishonest and can mislead those who are unaware of the deception. Deciphering Payday Loans Here’s what the payday loan advertisements don’t tell you: • The loans are expensive. The Consumer Protection Bureau says these lenders’ interest rates are in the stratosphere at nearly 400 percent. Even high-interest credit card rates are only around 30 percent. • Just because the loan is easy to get doesn’t make it a good idea. Look for other options. They target you if you’re young or have bad credit by touting “no credit check” or other documentation. • Social media advertising is untrustworthy. Looks too good to be true? It is. Never take the claims made in social media ads at face value. Please investigate. • Make sure you can repay the loan. Your high interest rates can trap you. Your inability to repay the loan can further ruin your credit. • You should never pay an upfront fee for a loan. Never pay with a postdated check to cover the amount borrowed plus interest. • Walk away if they ask for fees paid in advance and in cash. The same applies to bank transfer requests. • You should only borrow what you know you can pay back with your first paycheck. If they allow you to “carry over” the balance from week to week, they charge additional fees. The next thing you know, you owe a lot more than you originally needed. • You have rights. They are required by law to disclose your rights before they grant you the loan. This should include the cost, interest rate, and any other fees. It can all be in the fine print and you should read it all. • You should keep all records. Some report receiving calls from collection agencies years after the loan is repaid. Keep your proof that you repaid the loan. • You should look at any deals you are considering on bbb.org. • If you are being treated unfairly, you should report it to the Federal Trade Commission and the BBB. Better Alternatives If it’s not too late, develop a spending budget with an emergency fund. Putting aside even a small amount of cash with every paycheck can help you overcome financial difficulties. If you need credit, look around. Look at interest rates, fees, and late fees, all of which are in the fine print that only savvy customers read. Credit unions are always a good place to look for small loans with reasonable fees. Even credit card advances can be better than payday loans. Remember to contact creditors if you cannot pay on time. Many will work with you to develop a payment plan. For answers to other questions about payday loans and their alternatives, contact BBB at (800) 856-2417 or visit our website at BBB.org.