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Cash-advance loans may carry excessive fees, hidden charges

Who does not want "quick cash?"

The offers sound enticing, but financial counselors encourage people to do their research before taking out a payday loan, also known as a cash advance.

Bobbie Shaffett, family resource management specialist with the Mississippi State University Extension Service, said finance charges for these short-term cash loans may result in interest rates from 390 percent to 780 percent.

"These loans are much more expensive than other methods for quick cash," Shaffett said. "For example, a $300 cash advance on most credit cards will cost about $14 if repaid in a month. A pay-day loan for the same amount and time would cost about $105."

Shaffett said the annual loan volume is estimated at more than $40 billion nationally, with consumers paying loan fees in excess of $6 billion.

Shaffett and other financial advisers in Mississippi are taking part in a consumer protection campaign. They are attempting to increase awareness of issues such as payday loan pitfalls, identity theft, senior adult concerns and fraud.

They also are promoting the importance of saving money, especially for emergency needs, which are often the reasons people turn to pay-day lenders.

"There are several actions consumers should consider before they take out a pay-day loan," Shaffett said.

# Find a credit counselor to help review debt issues.

# Contact creditors to set up payment arrangements.

# Borrow from family or friends. In some cases, social service agencies or religious groups will assist in short-term or emergency needs.

# Compare banks, credit unions and finance companies for other loan options.

# Set up overdraft protection using a credit card or savings account, but beware of "bounce protection" programs that can have significant interest fees.

Shretta Varnado, an Extension area family resource management agent in Pike County, said many people become trapped in loan agreements that compound existing financial problems.

Source : http://www.clintonnews.com/