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Plan Well, Retire Well

Saving and investing your money

Payday Loans: Money Solution or Problem?

Today, we welcome Dedra Thomas, Extension Educator - Consumer Economics in Cook County, as our newest blogger. Dedra holds an MBA and is a Certified Educator in Personal Finance (CEPF).

In today's economy there are many consumers living from paycheck to paycheck and without a savings plan. Emergencies arise, as they always do, and the consumer is left with few choices to meet their short-term money emergency. The Payday Loan has positioned itself as the solution to your money problems. However, with the high interest rates of up to 500% or more, the Payday Loan is not a money solution, it is a money problem.

According to the Illinois Attorney General, the Payday Loan is a revolving cycle of debt that often carries triple digit interest rates and multiple hidden fees. Some consumers never recover from this debt and may have to resort to filing bankruptcy to payoff this debt. Here are some tips to avoid being a victim to the payday loan cycle of debt:

  1. Save! Save! Save! Saving a little can add up to a lot. With each paycheck, put some away for an emergency. Remember, savings is about accumulation so save consistently and watch your money grow.
  2. Contact your bank or financial institution. Some banks and financial institutions offer short-term installment loans at much lower rates and terms than a payday loan.
  3. Many community organizations provide emergency assistant through social services programs. Check your local village hall or library's for listings or search on the web for these programs.
  4. Check with your employer for paycheck advances. This option is not a loan and usually has no interest payments attached. Your next paycheck will be reduced by the amount of your advancement. If your employer does charge a small fee, it will not continue to revolve and accumulate to a huge debt crisis as a payday loan would.
  5. Reach out to friends and family. Before choosing a payday loan, ask for assistance from friends and family to meet your emergency cash flow needs.

If you find yourself stuck in a payday loan debt cycle, please seek information from the following resources:,,

Remember: All money problems have solutions!

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