It’s that time of year when people become more joyful and wallets get tighter. Traveling and shopping can eat up a budget in no time. Tough decisions need to be made for many families to go into the new year without acquiring new end of year debt.
It can be very tempting to dip into savings or use a credit card to fulfill gift obligations. I’ve noticed a significant increase in credit card offers in our mailbox in the past month. They meet ‘The Shredder’.
Something that should be a non-factor are payday lenders, or direct deposit high interest loans. Military families are targeted by these type of lenders. They can be found near military installations in states that have not enacted laws against predatory lending. Next to the ‘EZ’-type car dealers and furniture rental businesses. One time use can turn into a pattern that spirals out of financial control.
This 2011 article added a clarification with some sobering statistics about the customer base of payday lenders. A real life example from the same article is below:
“Take, for example, the case of an Air Force sergeant who got behind on her car payments and rent. To catch up, she took out a $500 payday loan, agreeing to pay back $600 in two weeks. Things spiraled downhill from there:
Unable to repay, she took out other payday loans … to pay off these loans, she contacted an installment loan company who provided her with a $10,000 loan at 50 percent APR. Total cost to pay off the payday loans was $12,750 and her total obligation to the installment loan company was $15,000. Her financial problems were a contributing factor to her pending divorce.
50% was not a misprint. That’s pure trouble down the line.
Payday lenders aren’t the only ones to steer clear from. Mainstream banks have gotten on the ride with direct deposit based loans. A person could end up paying $900 for a borrowed amount of $500 over a six month period according to The Center For Responsible Lending.
The leopard keeps changing its spots and it is up to us, the consumer, to research lenders and their terms. For military, having direct deposit, “steady pay” and being government affiliated (which makes garnishment easier), one has to be extremely careful of what sounds too good to be true.
So what do you do? November is here and there are expectations. Keep it realistic. If you can’t buy all the toys and gifts you want, accept the reality and work within your means. People are putting together thoughtful homemade gifts and pruning their lists.
Now is the time to prepare for next year. There are Christmas clubs that some banks offer and systematic savings for emergencies is always a good idea. Installations offer free assistance for budgeting and saving. Please take advantage of one of our great military benefits. Even if the payday lender bug did bite you, there is help to get back on track.
What has helped you to improve your financial situation?