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Beware of hefty fees, high interest rates of payday loans

Payday loans can come with hefty fees and very high interest rates, but fortunately, alternatives exist.
Payday loans can come with hefty fees and very high interest rates, but fortunately, alternatives exist.

If you’re struggling to pay your bills, you might be considering a payday loan. But Consumer Reports warns you need to be careful! Even with some recent reforms, many of these loans still come with hefty fees and very high interest rates. The good news is that there are alternatives -- if you know where to look.

The pandemic really exacerbated the problems with payday lenders, especially for people in low-income and Black communities. So there has been a push to bring better and fairer banking services to them.

What can you do right now if you’re in need of emergency money fast? First, look for a Community Development Financial Institution (CDFI) near you. They’re financial service providers, like a bank or credit union, whose mission is to bring financial services to low-income communities, places that many traditional banks have largely excluded.

And joining a CDFI can be affordable. They offer banking services at no or low cost with an initial deposit as small as $25.

Another avenue you can go is to find a nonprofit with a payment relief program. For example, Exodus Lending is a nonprofit dedicated to helping people get out of payday loan debt. These groups consolidate your loans for no fee and 0% interest.

If you are still considering a payday loan, the state laws differ in Georgia and Florida. It’s generally illegal in Georgia unless the lender has a special license from the state. Here are the rules: https://dbf.georgia.gov/payday-lending

It’s legal in Florida but regulated by the state with consumer protections. Here are the rules: https://flofr.gov/sitePages/PaydayLenders.htm.