How to avoid payday loans snowballing nto a dangerous debt cycle


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ST. LOUIS, Mo. — When cash runs short and bills are due, some workers look to payday loans.  The Better Business Bureau says payday lenders tend to appeal to people who can't get a credit card or bank loan. But, payday loans can lead borrowers into a dangerous debt cycle.  The BBB has a warning so these kinds of loans don't "snowball" on you.

The BBB recommends consumers follow these tips in order to be informed borrowers:

  • Do your homework before borrowing. Check out the lender's business profile at
  • Never pay an upfront fee. Some short-term loan providers will ask for a post-dated check to cover the amount you borrowed plus interest and fees. However, if any lender asks for those fees in cash before giving you any money, walk away — especially if it`s an online lender asking for money via wire transfer. Charging undisclosed upfront fees is illegal, and cash sent by wire cannot be traced.
  • Limit the amount you borrow. Only borrow what you know you can pay off with your first paycheck. Most companies will allow you to 'rollover' the balance for several weeks or months but will tack on fees the whole time. This can result in you owing several times what you borrowed in the first place.
  • Know your rights. Payday lenders are required to disclose certain information before initiating a loan. That information includes the cost, the interest rate to be paid and the specific fees that will be paid.
  • Read the fine print. Pay close attention to fees and consequences of non-payment. Will the company allow you to make arrangements if you cannot pay?
  • Keep your documentation. Many consumers said they started receiving calls from collection agencies years after they paid off a payday loan. Some of these calls were simple errors; others were attempts by scammers to collect a debt that is not owed. Protect yourself by having documentation that all loans were paid in full.
  • Know where to turn. If you feel a lender has committed fraud or taken advantage of you, file a complaint with BBB and the FTC.

For assistance, go to or call 888-996-3887.


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