Getting your Money right.

For all of the talk of empowering black women to lead the best lives that they can one thing stands out. Living the good life takes money and how you handle that aspect of your life is a learned skill just like any other that you will learn over time.

Some are lucky to learn these lessons at their parents knee. Others not so much. The recent articles of Beyond Black & White have inspired me to start a series of articles on money management. Whether you are starting out or digging your self out of a hole the information is out there for all to use to prosper. It is free.

Today’s lesson: The Payday Loan.
The New York times recently did an article on major banks aiding in payday loans. You can read the story here.

Now the back ground.

What is it?
If you were in a financial fix would you be willing to borrow from a loan shark? Maybe not. Those guys do not play when it comes to collecting their money and they do not take no for an answer.
Think of the payday loan the same way. These operators deal is small, usually $100 -$1500, short term, usually 7 to 30 day loans at exorbitant rates. You will get a quick and dirty definition here:

https://www.investopedia.com/terms/p/payday-loans.asp#axzz2LrWmrcOt

You will get even more information here:

https://www.consumer.ftc.gov/articles/0097-payday-loans

Why are they your nightmare?
These loans can roll over for longer periods. In fact the lenders have no problem rolling these over since it is the fees that they want so as long as you keep paying on the loan they keep collecting the fees. There in lay the problem. If you are in a situation that you cannot come up with $100 to $1,500 then it is pretty safe that you will not come up with it at the end of the loan period. Payday loans are used mostly by those at the bottom of the economic scale. Read that to mean the poor. Read that to mean minorities who make up a large percentage of the poor. Read that to mean women of color who are included in that group and yep that means black women, which is why I am writing this. Now few people do pay off the loans on time but most do not and are caught in the web of escalating fees.

LENDERS LOVE FEES. Never forget that. That is the mother’s milk of the industry. Lenders look for all kinds of ways to charge us for using their money. The smart consumer finds all kinds of ways to avoid paying these fees.

Are these loans illegal?
In some states they are. In others they are not.
Here is a current list of States where they are illegal.
https://www.debtconsolidationcare.com/settlement/pdl-prohibited.html

If you are in the military this information is for you.

https://usmilitary.about.com/od/millegislation/a/paydayloans.htm

The fee, the whole fee and nothing but the fee.
As I said before this is the mother’s milk of the banking industry of which payday loans, like it or not are a part. In the credit card industry people who pay their balance in full at the end of the month are called Deadbeats. Nice huh? Deadbeats. Why is that? Because these folks used credit with out paying the fees that accrue from carrying a balance. That gives you a clue about what these lenders think about people who pay on time and in full. Well the banking and pay day folks are really not much better. They love you to carry a balance. No, they LOVE you to carry a balance. They love you to keep paying those fees month after month, in fact they make it easy for you to do that. They will roll over your balance month after month. They will offer you more money to borrow. They will let you pay only the interest owed on your loan. Each time they do something like that they will recalculate your loan agreement and add the fees incurred to the pot. This is why you never pay these kind of loans off and why they grow….and grow…..and grow.

When these loans grow the fees grow along with them. If you are already in a financially risky situation you have just made it worse. The loan gets bigger, you borrow more to stay ahead of it, the debt grows, eating more and more of your disposable income until you crash. Does the payday lender want you to crash? No. They want you to keep paying fees. But if you crash then that is on you, you are considered a deadbeat and they now have all kinds of laws on their side to liquidate what little you have to get their money. They will attach your pay check, they will take your home they will destroy your credit rating, you name it and they will sell the debt to a collection agency. Let the dunning calls and harassment begin. Oh and don’t look to declaring bankruptcy to save you . The laws were changed to make that harder for most people to do.

From the New York Times article:
“Ivy Brodsky, 37, thought she had figured out a way to stop six payday lenders from taking money from her account when she visited her Chase branch in Brighton Beach in Brooklyn in March to close it. But Chase kept the account open and between April and May, the six Internet lenders tried to withdraw money from Ms. Brodsky’s account 55 times, according to bank records reviewed by The New York Times. Chase charged her $1,523 in fees — a combination of 44 insufficient fund fees, extended overdraft fees and service fees.
For Subrina Baptiste, 33, an educational assistant in Brooklyn, the overdraft fees levied by Chase cannibalized her child support income. She said she applied for a $400 loan from Loanshoponline.com and a $700 loan from Advancemetoday.com in 2011. The loans, with annual interest rates of 730 percent and 584 percent respectively, skirt New York law.

Ms. Baptiste said she asked Chase to revoke the automatic withdrawals in October 2011, but was told that she had to ask the lenders instead. In one month, her bank records show, the lenders tried to take money from her account at least six times. Chase charged her $812 in fees and deducted over $600 from her child-support payments to cover them.”

Those numbers are scary aren’t they? Now, I do not know the personal circumstances of the women in the article but consider this. You have a women, alone or with children. She does not make much money and is working her tail off to keep it together. She is in a bind and takes out one of these loans and starts the cycle. Think of what else this woman could be doing with the money she paid to fees. Think of the better life style that she could afford. Better, maybe safer housing. Maybe out of blackistan? A college course that she could take to improve her job prospects. A car so that she does not have to stand and wait for a bus to get around. More money at the end of the month, more savings for her retirement. Sometimes it is just a few dollars that make the difference.

How do you prevent yourself from being a victim of Payday loans?
Short answer do not take out these kinds of loans. These are loans of desperation and sound money management skills will prevent the need for them.
What follows are some resources to help:
https://banking.about.com/od/loans/a/PaydayLoans.htm
https://www.wikihow.com/Deal-With-the-Consequences-of-Not-Paying-Payday-Loans

The long and the short of it if you are already in the hole you must do what you can to dig yourself out. After that not falling back in is key to a better life and the subject for our next article.

An emergency fund is your best friend.