Predatory lending can lead to long-term financial hardship as these lending practices are designed to trap borrowers in a cycle of debt, making it difficult for them to escape.
A study by the Consumer Finance Protection Bureau found that four out of five payday loans are rolled over or followed by another loan within 14 days, leading to repeated fees and interest charges that can quickly spiral out of control.
In addition, the high-interest rates of predatory loans and unfavorable repayment terms can lead to wage garnishments, repossessions, and even foreclosures, causing long-term financial hardship for borrowers.
If you or someone you love is considering a payday or cash advance loan, it’s important to know that there are other options available to you.
Community-based organizations
Many community-based organizations, such as non-profits, offer financial assistance and support to those in need. These organizations may offer small loans, debt counseling and other resources to help individuals get back on their feet and avoid the trap of predatory lending.
Government programs
Some government programs, such as the Emergency Rental Assistance Program or the Low Income Home Energy Assistance Program, oftentimes provide financial support to those in need. Eligible individuals may be able to receive assistance with rent, utilities and other necessities, helping to reduce the need for high-cost loans from predatory lenders.
Someone you trust
Borrowing from family or friends can be a good alternative to predatory lending, especially for smaller amounts. This option may not be suitable for everyone, but it can be a low-cost way to borrow money without the risks associated with predatory lending practices. If you’re considering taking this route, there are a few line items you’ll want to consider including in your IOU.
It's important to note that these alternatives may not always be immediately available or feasible for everyone, but they are worth exploring if you need to borrow money and want to avoid the risks associated with predatory lending. Before making a decision, it's also important to carefully consider your financial situation, read all loan documents and agreements carefully and seek the advice of a trusted financial advisor or lawyer if necessary.
In conclusion, predatory lending is a serious problem that has far-reaching consequences for individuals, communities and society as a whole. By taking action to protect people from these dangerous and unethical lenders, we can help build a stronger and more equitable financial system for everyone. If you or someone you know is being affected by predatory lending, it is important to reach out for help and support.
