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.

The Problem With Rent-To-Own Stores and Payday Lenders

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 pray 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.