The holidays often leads to overspending, which causes many people to turn to high-interest payday loans to help them deal with the financial shortfalls during the festive season. This is wonderful news for predatory lenders, but not so much for consumers.
These types of loans give quick cash but could go well-beyond the winter season in paying them back. Consumers are often paying way more than the original loan amount was for – both in fees and interest.
According to Center for Responsible Lending research, predatory payday loans rake in $4.1 billion in fees each year – usually because borrowers cannot repay the original loan back in the timeframe agreed to in the loan. On top of that interest rates average 391 percent, which can take borrowers up to 10 years to repay the loan.
Besides payday loans, people can use their car titles to attain money but has interest rates that are 30 percent more than credit cards. The average car title loan is $1,000 and is secured by agreeing the vehicle as collateral. If the loan is not paid back, the vehicle is repossessed by the lender.
Do not use prepaid cards either, as they are often filled fees and terms in the fine print that could affect the money on the card. With the assessment of these fees, you may have less money on the card that you had initially to buy stuff.
Debit cards also result in overdraft fees – usually around $35 a charge. Banks use deceptive practices to get the most from these fees. For example, they may allow a large amount to go through first before several smaller ones even if that large amount was a day or so after the smaller purchases. Multiple overdrafts may lead to the account being closed.