Payday Loans, Title Loans and Other Toxic Debt

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Payday loans, title loans, rent-to-own, and other super high interest debt. This stuff is toxic. The average interest rate on payday loans is 400%. Interest rates on title loans and pawn lending can exceed 100%. Refund Anticipation Loans and Buy Here Pay Here Auto Loans carry interest rates well above 50%. If you rent-to-own, you pay three times as much for the item. Check cashing costs 7-10% of your check. All of these services are ridiculous. They ruin any chance you have of financial freedom. I know, there are times when you feel like you have no other choice. But, try these options before using these services:

  • Credit unions / Community Banks: They cash checks. They are nonprofits with a mission to help you. Go to your local credit union. Find out how to open an account. They may have fees but they’re small in comparison to these services.
  • Walmart: I don’t like the idea of check cashing but, if you’re doing it, Walmart has the lowest prices. It’s $3 up to $1,000 check and $6 for up to $5,000 check. Not great but much better than the alternatives.
  • Don’t buy it: This is easier said than done. If it’s life threatening, a payday loan is the least of your worries. Most purchases are not life threatening. You don’t need furniture in every room. You don’t need a big screen TV for football season. You don’t need to go out tonight. Get out of the cycle. Revisit your financial fuel. You’ll have more fun in the long run.

If you’ve already taken the plunge into one of the loans, get out fast. Stop reading this book, find every penny you have and pay them off. These loans keep you broke. They’re predatory. They hurt people and make them dependent. You’re better off smoking. I guess you know how I feel.

What are your experiences with these high interest loans? Are there situations where these loans are needed?