At interest rates that can reach 400%, and a two week loan costs on average $15 per $100 dollars lent [1] it is safe to say that most people know they are getting into a crap load of trouble with payday loans. The thing is they often don’t have a choice. Or rather the choice isn’t all that great (ex. loan vs eviction, loan vs no car). The problem is taking the loan comes with terrible consequences, and often makes a bad situation worse. But can payday loans be avoided? Should we try to protect those who are preyed upon by these sleazy money lenders?
It’s been said that a person should save to avoid payday loans. My question: How to save money while working for minimum wage, paying rent, a car loan (or other transportation), gas, food, health care, heat, etc …and possibly supporting a child? Realistically how much do you think the best penny pincher could save? Keep in mind that the health care available to minimum wage employees is usually very sub-par making medical treatment and medicine very expensive. Let’s do some math.
before taxes
$6.55/hr * 40hrs = $262/week (~800 month after taxes)
$6.55/hr * 50hrs = $361/week (assuming time and a half for overtime) (~1150 month after taxes)
Assume you live in a dump and cheaply:
$450/month - rent
$150/month - food
$90/month - utilities (really low)
$300/month - health care (low)
$150/month - transportation (using public transportation… low)
total so far… $1140/month
Realistically we know that there are more expenses though. So how does a person living in this situation save?
