During a Holiday Shopping Cash Crunch, Don’t Fall Victim to “Easy Money” Lending Schemes

By: Robin L. Wiessmann, Secretary of Banking and Securities

December 06, 2016

During this holiday season, a lot people find themselves in a “cash crunch” because of shopping expenses added to routine daily and monthly bills. Some people find themselves stretched too thin financially as the New Year approaches and search the Internet for quick, easy solutions to their money problems.

The Internet is a source of information and a useful shopping tool, but too many slick, well-designed websites contain “guarantees” of easy, hassle-free cash that can lead to long-term problems. As a result, too many of our neighbors, family, and friends take an “easy money” loan in December and wake up in January to a New Year’s hangover: paying shockingly high amounts of interest on these loans, losing their cars or motorcycles, or being hounded illegally by debt collectors.

What is an “easy money” loan?

Out-of-state “easy money” lenders target people who need cash without hassles. These kinds of loans are in the $100 to $1,000 range, although some go higher. Including interest and fees, these loans demand that you pay 300 to 1,000 annual percent interest (APR), which is illegal in Pennsylvania.

Many of these loans are short-term (due in two weeks to a month) although some loans take years to repay, often with added, unexpected charges.

How can you tell if an “easy money” lender is trying to take advantage of you?

There are several keys:

  • You are asked to pay fees up front before you receive any money;
  • You put your car at risk by giving up the title;
  • You aren’t sure you can actually afford the loan or pay it back on time;
  • You are being pressured to make a decision quickly; or
  • You don’t know where the loan company is actually located.
What are the risks with “easy money” loans?

If you can’t repay one of these loans right away, fees quickly add up and after just a couple of months can even go higher than the cost of the original loan. Borrowers who have taken out multiple short-term loans often find it difficult to keep up with the required fee payments, much less pay down the actual loans. As a result, they are forced to repeatedly extend the existing loans or even take out new loans to pay off the old ones.

Top 5 options to consider instead of an “easy money” loan
  1. Ask if your bank offers short-term loans or consider the Credit Union Better Choice program through a credit union.
  2. Talk to people you know and trust: family or friends, local community and/or religious organizations;
  3. Ask your employer for a payroll advance;
  4. Try to negotiate with your creditors to give you more time or raise your credit limit; or
  5. Pay the late fee: more than likely it will be less than the interest rate on an “easy money” loan.
I am struggling to pay off a short-term loan: where can I go for help?

You can call 1.800.PA.BANKS (800.722.2657) to discuss your situation confidentially with a trained professional. You will speak to a real person and we return phone calls promptly.

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