Look for local CLOUT
For some, there have been hard times for years. People who live forever on the narrow line between solvency and insolvency, stretching each month from paycheck to paycheck with no margin for error. For them, the slightest change can be a disaster. Even if the unexpected bill is only for $20, this can break the budget and lead to missed deadlines on instalments due on other debts. This was always the trap waiting for people to fall into. In every town, there were people who would lend for a few days. Just to tide over those in need to the next payday. There was a small fee added on to the loan. A token amount. Repay when the pay came in. It was so easy so long as the loan could be repaid and the fee rolled over into the next month’s budget. But, so often, the quick fix did not work out quite how the borrowers hoped and they were left scrambling to get the cash to repay loan after loan after loan. Pits are easy to fall into. Not so easy to dig out of.
Now that the recession has come, even middle class families are finding their budgets stretched. It is getting harder to keep all the balls up in the air. Mortgage and rent payments come first, then food, health insurance and then whatever is left puts gas in the car. If the car breaks down, there is a crisis. With the loans industry now moving online, there is an immediate cash bailout for anyone with a job and a bank account. It could not be easier. Just a simple online form to complete and, almost without a pause, approval comes back. The next working day, the money is in your account. It is a tempting option. But let us look at how it works. You apply to borrow $500. There is either a fee that comes off the top, say $50, so $450 is paid into your account and you repay $500. Or you receive $500 and repay $550. If you do not have the money, you will have to take a second loan with a second fee. Those $50 fees are going to mount up fast.
So, if you cannot avoid borrowing with a payday loan, you need to get the local CLOUT on your side. The original CLOUT is the Citizens of Louisville Organized and United Together. It is part of a national movement to cap the annualized interest rates chargeable on these loans. Some states already have caps in place. Other have bills in the legislative pipeline. The general movement is to limit the annual rate to 36%. The lenders, however, have moved to take their loans outside the scope of the legislation. Instead of lending for a few days, they are now offering open-ended loans which have exceptionally high rates. States like Virginia are now rushing legislation through to plug the loophole. These new laws will strip lending licenses from payday loan companies that charge astronomical rates. If you are going down this line. Borrow the smallest amount possible and pay it back immediately without renewing.