Cash advance/payday loans are NOT a coronavirus relief option

A Facebook follower’s struggle illustrates why these gimmicks are trap doors in times like these.

First came the virus. Then came unemployment. “Jane” couldn’t believe her misfortune.

The Memphis-area Facebook follower of mine is one of the 1,300-plus confirmed cases of coronavirus in Shelby County. She recovered, but she said between her laborious recovery and shelter-in-place orders, she lost her job.

That’s when she messaged me something that had me pounding my keyboard.

“I’ve been thinking about contacting a local cash advance/payday loan company to keep me above water,” she wrote. “Do you recommend one?”

ABSOLUTELY NOT.

Payday loans are something you should never consider. I don’t care how desperate you may be for cash. A payday loan is one of the worst things you can do. It’s a short-term cash loan based on you giving the payday company a personal check, either for future deposit or to give that company electronic access to your bank account. Sounds dangerous already, doesn’t it?

I once knew a Whitehaven man whose mother, on a fixed income of Social Security, was $1,200 in debt to six payday loan companies. SIX.

“She pays in interest a total of $180 a month,” he said. That’s crazy!

According to the Consumer Federation of America, the average payday loan carries a 400 percent interest rate. That’s worse than cash advance rates on credit cards (also bad personal finance, by the way). It’s even worse than those refund anticipation loans from rapid tax refund places. The finance charge is typically $15 to $30 to borrow $100.

Why would anyone do that?

On top of that, the payday loan office has your personal information:  your bank account number, where you live, maybe your Social Security number and electronic access to your funds. Unacceptable.

They say tragedies come in threes. “Jane” may have to lean on her family and pool their resources — because falling for a payday loan or cash advance sham would be her third defeat in what has been a demoralizing start to 2020.

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