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Money Traps That Keep You Broke
Sometimes money is drained from your account and you know where it went, sometimes it blows away and you have no idea what happened to it. Sadly, there are also “money traps” waiting to ensnare us when life happens and you need cash in a big hurry. Here are just a few of the big snares that can catch you unaware:
- Payday loans. Payday lenders are banned in Arkansas but the services are available in some other states and online. Borrowing money against your next paycheck can add up to more than 300% because the full amount plus interest and fees are due your very next pay period! And if it is not paid, then additional fees and interest are added to the loan. Not good….
- Pawnshop loans. The broker at the pawn shop decides the value of the item, the amount of the loan, and the amount you must pay to redeem your item. Your item is offered for sale if the specified amount is not paid by the end of the time period.
- Tax refund anticipation loans. If you qualify for a tax refund, the tax preparer may agree to give you a refund anticipation loan. Fees and charges will come out of your tax refund; these charges may be comparable to interest rates ranging from 50-500% of the loan amount! It’s better to wait a few days to receive your refund without losing any of it in interest.
- Rent to Own Plans. In short, rent to own plans cost three to four times as much as paying cash and twice as much as using regular credit. Also, if you miss a payment, the store can come and take the items, and you will have nothing to show for the payments you made.
For more information on identifying money traps, call your county Extension office and ask for the publication, “Cash Crisis – Money Traps that Keep You Broke”, FCS 725 or go to our Publications page and download it.