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Payday Loans: A Growing Business with Growing Fees

Payday loans, cash-advance loans, postdated check loans, delayed deposit check loans, payroll advance, or deferred deposit-- whatever name you use, it's a one billion dollar business in the U.S.

Payday loan businesses give cash advances on paychecks and make money by charging a fee. The payday lender agrees to write a pre-dated check for $115, for example, for a $100 cash advance. The customer and the payday lender both understand there are insufficient funds for the check to clear, but payday is next Friday. Then when next Friday comes, the customer can either pay the $115 in cash, allow the check to be deposited, or renew, or "roll over," the loan until the next payday in two weeks (and pay another fee).

There are few limits to what a check-cashing outlet can charge for cashing a check. Consumers could end up paying 261% APR to 913% APR. Unfortunately, the most affected by these high fees are low to moderate-income individuals.

Instead of payday loans, your Credit Union can offer a smarter solution. Feel free to call and talk to one of our loan representatives at 330-493-7602.

 

 





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