The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
An Alabama legislative committee recently approved a bill that would lower fees charged by payday lenders in the state, but a church in Birmingham is going several steps further, paying off the loans for 48 families in financial need.
The Worship Center Christian Church, led by Pastor Vanable H. Moody, began paying off $41,000 in payday loan debt earlier this month for members and non-members alike.
“We’ve been in a teaching series about financial management, and one of the things we recognized in Alabama that’s a really bad epidemic is the payday loan industry,” Moody told local CBS affiliate WIAT TV. “So we solicited a number of people who were in overwhelming debt with the payday loan industry … we wanted to teach them, not just about financial management, but to give them the tools to get out.”
The church also mandated financial counseling for the recipients of the loan payoffs so they can stay out of debt. A 2013 report from Pew Charitable Trusts showed that just 14% of payday loan borrowers can afford to repay the average payday loan. It found that “the average borrower can afford to pay $50 per two weeks to a payday lender — similar to the fee for renewing a typical payday or bank deposit advance loan — but only 14% can afford the more than $400 needed to pay off the full amount of these non-amortizing loans.”
“I wanted [the congregation] to understand how bad debt is— it really is like a prison,” Moody said in the WIAT TV interview, discussing a February sermon he gave while wearing a prison uniform and shackles. “We want people to be aggressive about getting out of debt, to help their lives, their children and successive generations.
Under current Alabama law, lenders can charge fees of $17.50 per $100 borrowed for loans that must be repaid in as little as 2 weeks, but a new bill approved by the House Financial Services Committee earlier this month seeks to reduce the maximum allowable fee to $15 per $100, reducing the annual percentage rate by 180%, from an average of 455% down to 275%.
Before you consider applying for a payday loan, step back and consider your options. Ask yourself if it is really an emergency. Is it possible to wait to repair your car or pay your bills until your next paycheck? Remember, a $25 late fee on a bill is cheaper than a $40+ finance charge for a payday loan. Think about other ways to borrow money that are often lower-interest options:
If you have evaluated all of your options and decide an emergency payday loan is right for you, be sure to understand all the costs and terms before you apply.
If your bad credit is keeping you from getting a credit card or qualified loan, you can start repairing your credit. Getting negative, inaccurate information off of your credit reports is one of the fastest ways to see an improvement in your scores. You can view your credit scores for free each month on Credit.com.
Image: iStock
March 8, 2021
Personal Loans
April 8, 2020
Personal Loans