If you are looking for ways to obtain extra holiday cash, steer away from payday loans, pawn shops and rent-to-own options. Although desperate times often call for desperate measures, these tactics can leave you worse off than where you began.
Payday Loans – To obtain a payday loan, you write a post-dated check for the amount of the loan plus any fees the lender tacks on. You then receive the amount of money you initially needed to borrow, promising to pay back that amount plus the fees. The term of the typical payday loan is one to two weeks, at which point the lender cashes your post-dated check. Most payday lenders will charge a certain dollar amount per $100 borrowed. Many consumers cannot repay the loan at term, and end up rolling it over, thus adding on more fees and interest.
Pawn Shops – People can do several things at pawn shops. They can borrow money by putting up something of value as collateral, they can sell their merchandise outright, or they can buy the merchandise that is for sale at the shop. There are bargains at pawn shops, but only for those buying the merchandise, not for the sellers. The problem lies in the interest and fees, with APRs typically in the triple-digit range once everything is added in. Further, some studies show that only 60 percent of pawners end up reclaiming their merchandise, thus they have essentially sold an item for cents on the dollar, something they wouldn’t otherwise do.
Rent-to-Own – A quick trip to the furniture or electronics store could confirm that a new living room set or flat panel TV is out of your price range. Then you notice an ad for similar items with affordable monthly payments. It seems too good to be true, and it is. The problem once again lies in the interest and fees. For instance, if you bought a $200 item and agreed to make weekly payments of $15 for 78 weeks (basically one and one-half years), you’d end up paying $1,170 for that $200 item at an APR of 388 percent. Adding insult to injury, it is likely that you could have purchased the same item at a traditional store for a fraction of the overall cost.
For help finding money for holiday expenses, contact CCCS. To find the office closest to you, dial 800-989-2227 or go online to www.cccsdv.org.
Tags: cccs, consumer, holiday shopping
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