Beware: Rent to Own and Payday Loans
by Phil Stratigis
Often, consumers feel the pinch of needing something
immediately, whether it be money or a physical item. During these
times, consumers need to be very wary, as many of the options
available to them are sometimes well disguised traps meant to take
advantage of their situation. Two of the biggest traps to avoid are
Rent-To-Own stores and payday lenders.
Rent-To-Own stores prey on the consumer's desire to immediately
have material possessions. These stores have become popular with
people who have poor credit, and heavily target lower-income
consumers.
Rent-To-Own stores lure in consumers with promises of providing
high-end merchandise, such as flat screen TV's and furniture, at
"affordable" payments drawn out over a long timeframe.
The problem with Rent-To-Own stores is that they are able to
hide extremely high interest charges and fees over time. Interest
charged at these stores can run as high as 50% and end up costing
you far more than the item is actually worth.
Alternatives to these stores include making a savings plan to
buy the item outright or shopping at second-hand stores like
Goodwill for more affordable items.
Consumers who feel the need for a smaller amount of cash in a
short timeframe sometimes turn to payday loans. These products are
short-term loans that are meant to give people money until their
next payday. Although this sounds like a noble, useful product, the
interest rates and fees can make it impossible for the
borrower to repay the debt in the anticipated timeframe.
The interest rates are so high that these loan products are
currently illegal in the state of New York due to usury laws. The
annual percentage rate (APR) of a payday loan can reach into the
hundreds, trapping the consumer in a cycle of being unable to repay
the loan.
These loan products should be avoided at all cost. The best way
to avoid feeling the need to take out a payday loan is to prepare
an emergency fund into which you deposit a small amount each month
in case of unexpected expenses.
