Paycheck lending should be your last resort.

These are loans you get from companies like “Cash Advantage” that are very short term, running only to your next paycheck (which you often sign over to the company) — something to “tide you over.” They have interest rates that would make the Mafia blush. “Cash Advantage” charges up to 782% annual interest. Even credit card companies seldom go above 35%. For every dollar borrowed at “Cash Advantage” you pay $17.64 in interest.

But even these interest rates are not the worst problem with these lenders. The worst problem is that, for many people, their first loan is the first step in a never ending process that could be dogging you for years. If you pay back the first loan, you might not have enough money to pay next week’s bills, so you get another loan to pay the first one, and one it goes, week after week.

This situation is to be avoided at all reasonable costs.

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