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How To Avoid Payday Loans? / By: Pre-Anna Reese


“Did you know 12 million Americans take out payday loans each year, spending billions of dollars on loan fees or sinking them deeper and deeper into debt?” (CFPB, 2016). Payday loans are short-term unsecured loans, with high interest rates. One way to avoid payday loans is by saving your money for unexpected expenses.

Payday loans are easier to obtain which may appear to be the easy way out for those in need of immediate additional funds. Dan Allen researched and wrote an article highlighting how, “People use this specific loan to cover unexpected expenses, avoid embarrassment from others, loans for bills…“(WDPGPDL, Sep 2020). The most common reason for getting a payday loan is to cover car expenses. Payday interest loan rates historically could easily go up to 400%, but not after the passing of the Predatory Loan Prevention Act, payday loans have been capped at 36%. Ms. Beasley, who has taken out payday loans, said “It seems easy to access the money”. But keep in mind when you take out a payday loan you are agreeing to pay back what you borrowed by the next paycheck. So if you live paycheck to paycheck this can be a problem.

Payday loans seem like an option for you if you are financially struggling. Michelle Jackson, an author that focuses on financially empowering single women, suggests, “If you find yourself in financial distress, don't beat yourself up, but do spend time evaluating your overall financial picture before making a decision that could complicate your finances further”(HTAPDL, June 2021).

How can you avoid the need for payday loans? You can start by opening a checking & savings account while you are young. This can benefit you in the long run by creating an emergency savings account that generates interest.

If you do need an emergency loan, there are other companies that offer online loans for 36% percent interest or less. Ms. Meegan Dugan Bassett from Woodstock Institute stated,“Another partner, Capital Good Fund, is a nonprofit that offers financial coaching and lower-cost loans that can help people build their credit as well.” There are alternative options for everyone so make sure to do your research. Learn more here.


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