The loans may help certain families out of a financial bind, but California Attorney General Rob Bonta told NBC 7 and Telemundo 20’s Sergio Flores that consumers should be very cautious when taking out one of these loans.
What to Know
- National Consumer Protection Week is March 5 - 11
- Each day, NBC 7 Responds will bring you tips to help you become a more savvy consumer
- Californians may have more consumer rights and protections than people who live in other states
The rising cost of living has pushed more families to stretch their budgets, and in some cases take out loans. Payday loans may help certain families out of a financial bind, but California Attorney General Rob Bonta says consumers should be very cautious when taking out one of these loans.
“There are laws that surround their operations, and as long as they're compliant, they are a legal option for a consumer,” Bonta told NBC 7 Responds. “I think they are one of the least financially beneficial for a consumer and they have high potential to be very, very detrimental for a consumer.”
Bonta adds that a bit of discipline from the borrower could go a long way when it comes to paying back a payday loan. “If it feels wrong, it probably is. And resist the temptation to act under this false sense of urgency and false sense of high pressure, and then don't borrow more than you can afford.”
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In California, the maximum amount a consumer can borrow from a payday lender is $300. The maximum interest they can charge you is 15%, which may not sound like a lot, but for a two-week loan, that’s equal to a 460% APR.
“The interest will build up,” Bonta said. “It'll compound and it can be easy to fall into a spiral of debt.”
And getting deeper in the red may keep you depending on payday loans for a longer time than you may have originally intended.
Here are a few strategies that could help reduce the amount you may need to borrow, or even help you get through the tough times without needing a loan.
- Contact the lender, company or government agency you owe money to and find out if they can put you on a payment plan.
- Cut back on unnecessary spending as much as possible, including streaming services and other subscriptions you may have.
- Cook more at home. Remember, the larger your family, the more you can save with home-cooked meals.
If you do end up needing the help of a payday lender, the California Department of Financial Protection and Innovation is a good first stop. You can check the license of the lender, see a history of any disciplinary actions or file a complaint.
