by: Better Business Office
If you’ve ever needed extra money to make it to your next paycheck, you understand the appeal of a payday loan. Now, video ads on places like TikTok are promoting small, short-term loans to a new, young audience, and making them look cheap and easy. However, just because it looks simple, doesn’t mean it is. Abusive Payday Lenders they are using the platform to make dishonest claims that promise instant cash with no credit checks, late fees or interest rates.
Here’s what you need to know before you get a payday loan from a social media ad.
- Apps may not call it “interest rate,” but that’s what it is. Many of the lenders who advertise on TikTok try to circumvent regulations by creating new names for your service. By calling their interest rates a “tip” or a “fee,” lenders hope you won’t realize how much interest you’ll actually pay. keep that in mind responsible lenders they will always be willing to disclose the APR on their loans.
- Payday loans are expensive. According to Consumer Financial Protection Bureau. That’s a big jump even from a high-interest credit card, which has rates of around 30 percent.
- Just because it’s easy doesn’t make a payday loan a good idea. If you’re young or don’t have access to other types of credit, you’re an ideal target for a payday lender. Less than scrupulous lenders promote the fact that you don’t need a credit check or any paperwork to get a loan. However, that facility can come at a high cost. Before looking for a payday loan, spend some time looking at other options.
- Not all ads on social media are truthful. Payday lenders seen on TikTok can promise you instant cash. But if it sounds too good to be true, it probably is. Many businesses like these have faced scrutiny for deceptive credit practices, and some may simply be looking to access your bank account. Don’t believe everything you see in social media ads without doing more research.
- Make sure you can pay back the loan. With interest rates this high, many people find themselves trapped in a debt cycle. Also, payday loans can ruin your credit if you can’t pay what you owe.
Best alternatives to payday loans
- Develop a budget with an emergency fund. Create a budget so you know how much money is coming in and how much you need to pay your bills. This will help you avoid the need for a loan in the first place. Then set aside some cash each month to create an emergency fund. So you’ll be covered even if an unexpected expense or emergency arises.
- Get credit counseling. If you can’t pay your bills or are stuck in a cycle of debt because of a high-interest loan, get credit counseling. the US Department of Justice has a list of agencies for people seeking debt reduction assistance. In Canada, see this list of Canadian non-profit credit counseling agencies. Also, see the BBB’s advice on credit counseling for more resources.
- Compare prices if you need a loan. Compare interest rates, fees, and late fees by reading the fine print before choosing a lender. Pay close attention to both interest rates and loan renewal fees. Credit unions are a good place to get a small loan with reasonable interest rates. Even credit card cash advances, which typically carry double-digit interest rates, will likely have lower interest rates than what a payday lender will offer you. Watch tips for choosing a bank or credit union.
- Contact creditors if you can’t pay on time. If you realize you won’t be able to make a payment on time, don’t panic. Contact the creditor directly. Many creditors will be willing to work with you to come up with a payment plan that you can afford.
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