What to know and consider before taking out a personal loan


COLORADO SPRINGS – As many struggle to pay their bills, quick cash from a payday loan may seem tempting, but thousands of consumers filed complaints with the Better Business Bureau last year saying the experience was not what they expected and in some cases it left them worse. Payday loans can be helpful and put much-needed cash in your hands, but experts tell us you need to read the fine print.

“So I think although that might be an option. I think it’s your last option,” said Jonathan Liebert, CEO of BBB South Colorado. “I would advise people to read the fine print. Really make sure it’s something they want to do and really make sure they pay attention to these rates because these rates can be extraordinarily high.

These rates were such a concern to Colorado voters that in 2018 voters approved Proposition 111, which reduced the interest rate on payday loans to 36%. It has also eliminated all of the other finance charges and fees associated with payday loans.

Even with these protections, Sara Correll, a certified counselor and mental health expert from Colorado Springs, says that with what’s going on in the world today, anxiety can prevent good decisions from being made and can make people particularly vulnerable who face financial hardship. .

“Anxiety is very normal, but when we focus on our anxiety and let our anxiety rule our decisions, then we make emotional decisions. Then we maybe make inappropriate purchases, or we spend more money. money than we should, or we eat more than we should, or we drink more than we should, all to try and calm that anxiety, ”Correll said.

So how should we deal with this anxiety?

“If we can step into the present and stop focusing on the future and we can make decisions based on logic and not emotion,” Correll said.

Before even considering a loan, experts advise contacting your creditors first to see what relief might be available.

“Any business, any organization that has people who owe them money that they’re trying to raise, they’re working with people right now,” Liebert said. “They work with people to make sure they can make these payments and they give them a certain grace.”

In the past year, consumers have filed approximately 2,500 payday loan company complaints with better business bureaus across the country. That’s why experts say it’s important to do your homework on the company you’re doing business with.

“People have to find ways to pay their bills, and payday loans appeal to people whose credit may not be enough to get a credit card or a bank loan,” Liebert said. “For a lot of people this can be an option for them if they need some short term help to get them out and I think we really need to make sure people are aware that you have to. pay attention to this.

Consider other options before taking out a payday loan:

Does your bank or credit union offer short-term loans?

Check these local institutions to see if a better option is available. Personal loan rates are currently between 9% and 17%.

Have you thought about requesting an advance from your employer?

Can we borrow against life insurance? Talk to your agent to see if this is reasonable in your situation.

Can you borrow against your IRA or 401k? Some organizations have waived or reduced the penalties for these options, in the context of current economic conditions. Check with the carrier for your investment accounts.

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In addition to general concerns about the pitfalls of taking out a payday loan, people in desperate circumstances may not realize they are dealing with an unlicensed lender online. They can be scammers who are looking for nothing but your personal information, or unscrupulous lenders who make illegal loans.

The information below comes from Stop Fraud Colorado

Avoid falling in love with an unlicensed payday lender by following these tips:

  • Don’t share your personal information without doing business research.
  • Even if you complete the online form but do not press Submit, your information may have already been entered using keystroke logging.
  • Some companies are actually lead generators, not lenders, which means your personal information may be sold to multiple third-party lenders.
  • Check the website for a privacy policy. Does it disclose how your information will be shared or protected?

Protect your banking information:

  • Setting up automatic payments with an online payday lender might seem convenient, but you could allow an unlicensed business to access your bank account, making multiple unauthorized withdrawals.
  • Find out if the online payday lender has a physical location.
  • Lenders who do not disclose a physical location are often unlicensed and could even operate outside the country.
  • If the website does not have a “Contact Us” page, try looking for the website’s privacy policy or terms and conditions, which are often found at the bottom of the home page.

Read and understand the loan agreement:

  • Does the loan specify that Colorado law applies? A business must be licensed by the State of Colorado in order to make loans to Colorado consumers.

Check that the payday lender is licensed to provide payday loans in Colorado:

  • Search in the list of authorized supervised lenders, available here.
  • In order to become a licensed Colorado payday lender, the lender must provide specific information to determine if the company is in compliance with Colorado loan laws.
  • Approved lenders must adhere to Colorado payday loan laws, which set eligible loan rates and fee limits.

Anyone who believes they have been exploited by a payday lender should immediately contact the Colorado Attorney General’s Office to file a complaint: https://coag.gov/file-complaint/

For more resources, tips and reviews on consumer protection from payday lenders, visit https://www.bbb.org/local-bbb/bbb-of-southern-colorado

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