TRANSCRIPT: The federal government right now through the Financial Protection bureau is trying to write rules governing payday loans. Payday loans are loans where even if you don’t have good credit or you have no credit you can go borrow money just because you have a job.
The problem? Payday loans carry interest rates of usually 400 to 800%. They don’t tell you that, but that’s what they carry. Now the real, real, real problem with payday loans is they are ultra-short loans that when they come due, people can’t pay them, and they roll them over into a new loan and then another and then another and then another.
When you’re done, you’ve ended up paying interest that is way, way, way greater than the amount of money you borrowed. So they are trying to come up with rules where the loans will only be made to people who can afford them in the first place, which is like almost no one, with a loan that’s 400, 800%.
If you’re dealing with a tough spot financially, the last thing you should ever do is go get a payday loan. It only takes you deeper into trouble.