I hate to admit this but my parents, who of all people taught me the value of personal finance, found themselves stuck in the revolving door of payday loans. I had no judgement because we’re all adults but it was disheartening to see it happen since these were my loved ones.
The set-back stemmed from an incident where my mother was injured on the job, needed to cover bills, and found herself at a cash advance place (I’ll refrain from the name but it’s a major chain); I couldn’t blame them because times can be tough and it allowed for a way out of the pit that is debt.
After about the fifth time she had went to the location I had enough – I had to talk to her as an adult and tell her what I had been researching about these payday loan locations and that was:
· High interest rates
· Instant gratification
· Long-term goals
It boggled my mind that a cash advance location would take an average of 3-10% on most transactions which meant if you were doing a full-time paycheck for around $4-$500 you were easily spending $50 just to have it early. When you’re in a tough spot it makes sense because bills need to be paid but if you continue with this practice you’re at a negative gain when factoring the month.
Solution #1: An alternative to payday loans for those that do not have the credit for credit cards is through a company that actually offers loans which can be paid back within a set period; the APR may be high once over the limit but if it’s meant to be a week or bi-weekly occurrence it’s possible to keep it within line far easier than that of a major payday loan location. One such company is bluetrustloans.com offering installment loans, which are designed to make structured payments easy, not impossible.
The instant gratification came to mind, immediately, because it seemed that when I did visit these payday loan locations it was individuals cashing in for their full check when I imagined they probably only needed enough to cover the basics. There is a level of instant gratification because the fees favor it that way in the sense that you’re often charged as much to pull more than going with the minimum.
Solution #2: It’s not the most attractive option, but simply asking for help from friends and family can be a great alternative versus being stuck paying the extra for cashing checks and taking a loan from the locations. I know it can be disheartening to ask loved ones but this is where family matters more than ever; if you know you’re able to pay them back and follow through on promises it greatly outweighs having to pay the additional fees (and feel the stress) you’d get from your average payday location.
Establishing long-term goals was a touchy subject I had to bring up but was crucial. My parents are getting older and so naturally they are looking toward retirement. I know they understand what needs to be done but sometimes a third party hits it home. I sat down and talked to them about how things were going to be handled in the long-term since I nor my siblings may not be readily available to provide assistance – they needed a reminder that we’re all adults and need to take care of our personal priorities. If payday loans were to be a continual thing for their foreseeable future they would be eating into their potential investments in the retirement fund or toward projects that can increase their gains such as in housing or business development.
Solution #3: Since being a technical-type I took some time to help them get up-to-speed with what’s changing in the world of online banking and automation. I admit that I don’t understand all of it but I did my best which was to help lower their plans (often as simple as calling the providers and negotiating pricing) and replacing services with modern ones that are flexible (such as in the regard of cord cutting). Cutting out the loans, along with cutting costs on everyday expenses, revealed they could continue with their lifestyle without dipping into the negative. Furthermore, it helped to improve their credit scores, which helped to prevent future financial problems.
I’m really no more an expert on personal finance than the next Joe-Schmo on the street but I think the difference is that I’m willing to take the time to learn about finances and I’m willing to discuss it with my loved ones (even if it’s uncomfortable at times). We all have family members like this and it’s our duty to help them from getting caught in the trap game. If you know how to do your research then, in my opinion, it’s your duty to help – so speak up.