The Real Cost of a Payday Loan

With the government shutdown creating financial stress for many households, payday loans may seem like a quick solution to cover urgent expenses. But these short-term loans often come with high fees and interest rates that can trap borrowers in a cycle of debt.

What are payday loans

Payday loans are small, short-term loans - usually for or less - that must be repaid within two to four weeks. They're often marketed as fast cash to help in emergencies, but the high fees and tight repayment deadlines can make them hard to pay off.

The real cost of a payday loan

Many borrowers end up paying more in fees than they originally borrowed, and some stay in debt for months. Because payday lenders can withdraw money directly from a borrower's checking account, it may become harder to keep up with rent, bills, and other essentials.

Try these options first

Before turning to a payday loan, here are some other ways to get short-term relief:

• Ask your creditor for extra time or a payment plan.
• Talk to your mortgage lender or landlord about payment options for missed rent or mortgage payments caused by the government shutdown.
• Speak with your auto lender about payment options if you've missed a car payment due to the government shutdown.
• Check with your employer to see if they offer paycheck advances during the shutdown.
• Consider borrowing from trusted family or friends.
• Reach out to local nonprofits or community organizations that offer emergency assistance with food or living expenses.

If a payday loan is your only choice

In California, payday lenders must be licensed and follow state rules that limit fees and prevent borrowers from rolling over old loans into new ones. Before signing anything, make sure the lender is licensed through the Department of Financial Protection and Innovation's search tool.