Payday loans are no bargain

A payday loan can be very tempting to someone who needs $200 in a hurry. They're quick, convenient and accessible. But, they come with a hefty price tag.

"Payday loans are like Venus's flytrap," said Lori Pridgen, director of community relations for Consumer Credit Counseling Service of South Texas. "They may be attractive but they're very hard to get out of."

Payday loans are hard to get out of because they come with annualized interest rates that can reach 800 percent, Pridgen said. Also, some of the people taking these loans live from paycheck-to-paycheck and can't afford the interest payments.

With a payday loan, you're basically getting an expensive advance on your next paycheck. You're paying $15 to $30 in interest for each $100 borrowed, and you have about two weeks to make good on the loan. "The real problem occurs when you start rolling the loan from paycheck to paycheck," said Pridgen, noting that some $200 payday loans can double in three months.

If you're considering a payday loan, here are some tips from CCCS of South Texas to consider beforehand. CCCS is a nonprofit community service organization that offers debt and credit counseling, and consumer education.

Don't borrow your way out of debt. Many people make a bad situation worse by using a payday loan to make a car payment or a utility payment. First try to contact the lender and negotiate an extension or new repayment plan.

Ask your bank for a short-term loan. At least one bank offers a variation of a payday loan to people with direct deposit. The bank charges $5 for each $100 borrowed and takes it out of your next deposit. This is much less than many payday lenders charge.

Manage your money. Dedicate time each week to managing your money. Learn to prioritize and keep good records. Study more about money management topics from books and magazines or attend a free personal finance workshop.

Develop and stick to a budget. Creating a budget, or spending plan, can help you understand exactly where your money goes and where you need to change your spending patterns.

Track spending. Do you know where you spent the $20 that was in your wallet? Find out by tracking your spending. For one month, record where and how much money you spend wherever you go.

Lower expenses. Look for no or low-cost entertainment and cut back on other day-to-day spending. For instance, consider bringing your lunch to work, substituting video rentals for frequent trips to the movie theater, or visiting the local library as a resource for the latest books and magazines.

Get help. Consider an appointment with a credit counselor if you find yourself getting a payday loan. He or she will analyze your financial situation and make recommendations. To schedule a confidential consultation, call CCCS of South Texas at 800-333-4357.

For help with money management or budgeting, contact CCCS. This nonprofit, community service organization provides confidential counseling, guidance, debt management, and education programs to financially troubled consumers. CCCS is a member of the National Foundation for Credit Counseling.