NDSU Extension Service - Ramsey County

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Help that Doesn't Help

Help that Doesn’t Help

          At one time or another all of us have experienced a money crisis.  For many Americans, one major unexpected expense is one too many.  When that cash crisis happens, it can be tempting to utilize one of the many offers out there for quick cash.  Many of those offers, though, are help that in the long run doesn’t help.  Be aware of these potential money traps.

          Payday loans - With a payday loan, you borrow money against your next paycheck. The full amount plus interest and fees are due your next pay period. Additional fees and interest are added to the loan each time the loan is not paid in full. Fees and interest can add up to more than 300 percent.

          Tax refund anticipation loans - If you qualify for a tax refund, the tax preparer may agree to give you a refund anticipation loan. Fees and charges will come out of your tax refund. The fees charged for refund anticipation loans can be comparable to interest rates ranging from 50 to 500 percent of the loan amount. Instead, file electronically. You can have your refund in as little as 10 days.

          . Car title loans - Car title lending is available online and in nearby states. The amount of the loan is usually much less than the value of the car. Interest rates and fees are high. If the money is not repaid on time, the title company will sell your car. Consumers who use car title loans risk losing a valuable asset.

          . Check cashing charges and money orders - Without a checking account, the costs of cashing paychecks and money orders can add up. If you pay $3 to cash a weekly paycheck, you would be paying $156 by the end of the year. Four money orders per month, at an average cost of $4 each, would total $192 a year. Compare services in your area to find the lowest fees, or open a bank or credit union account.

          . Overdraft and late payments - Careless bill paying habits can be expensive. Both the merchant and the bank can charge for each bounced check. Many lenders charge a fee for late payments. Keep a careful eye on due dates and know your account balance.

          Rent-to-own plans - You will own the item only after you make all of the payments stated in the contract. Rent-to-own plans cost three to four times as much as paying cash and twice as much as using regular credit. Also, if you miss a payment, the store can come and take the items, and you will have nothing to show for the payments made.

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