Payday Loans = Costly Gash
THE Defense Department has launched a new effort to educate service members about the dangers of borrowing from "loan-shark" lending companies, and to teach them how to avoid ending up in a spiral of compounding debt.
"The most prevalent form of loan-shark lending affecting military personnel is what is known as "payday loans," said John M. Molino, deputy undersecretary of defense for military community and family policy. These short-term, high-rate loans are also called cash-advance loans, postdated check loans or deferred-deposit cash loans.
"A payday loan is essentially a plug--money that gets you from today to the next payday so you can cover your bills," Molino said.
But the cost of borrowing that money is high.
"Typically, a payday loan of $100 will cost the borrower $17 for two weeks. The average payday loan is about $500, so now we're talking about a fee of $85.
"By itself, that's not a big problem," Molino said. "However, when you consider that it is not uncommon for that military member to roll the loan over four or five times, that $85 will grow exponentially to the point where you are paying an enormous amount of money for the relatively meager amount of the loan. …