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Pay Day Loan “Elves” out in Full Force: Some say, Avoid Them

December 12, 2011

RICHMOND, Va. - It's Christmas time, so the payday lending elves are busy at work targeting Virginians who are looking for cash to buy gifts. Jay Speer, executive director of the Virginia Poverty Law Center, says Christmas is second only to back-to-school time in terms of the numbers of loans given out.

Payday loans can seem like a fast and easy solution because a worker can show a recent pay stub and usually get a loan matched to that amount. The problem, says Speer, is the annual interest rates on these loans, which are often as high as 300 percent or more.

"They're typically sold or portrayed as short-term loans, but once you get into the loan and you can't pay it back, you end up constantly stuck in it. Most people end up paying back maybe three times as much, or even more, as they borrowed."

Many people take months to pay back the loans, he adds, falling ever deeper into debt. Many of the payday lending companies defend their practice of offering such high-interest loans to low-income folks by saying these customers have nowhere else to turn. Speer advises that it's never a good idea to borrow money at such high interest rates, especially to go shopping.

Margaret Guenther, a licensed therapist in the Richmond area, observes that it's easy for people to feel as though they need to spend money they don't have during the holidays. She points out that people can give gifts in many ways, without going into debt, such as offering a "coupon" to family and friends.

"You can say, 'I'll do certain things for you - I'll clean your car, I'll do the dishes for you for a week - and here's your gift. You can cash this coupon in at any time.' Or you can make things for people."

Guenther adds it's important to be honest with yourself about what it really means to be in debt. Many people end up being plagued with fear and anxiety over paying the money back, she says, adding it really boils down to choice.

Monique Coppola, Public News Service - VA