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Payday Loan Alternatives Becoming More Widely Available
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In the winter of 2016, Missy Juliette, now 36 and of St. Paul, Minn., had to choose between paying the rent and settling overdue heating and electric bills. Her credit cards were maxed out, and her wages were being garnished for back taxes. Getting a small loan from a bank wasn’t an option, nor was borrowing from family. “I’d asked them for money before and couldn’t face the humiliation of it,” she says.
So, as millions of Americans do every year, she went outside the traditional banking system, turning to payday lenders to borrow $730 in two separate loans. The interest rates were high-with one at 266 percent-and she was unable to pay the loans off by her next payday in two weeks, as required. In four months she owed $960 on that initial $730.
For people like Juliette who need emergency money quickly, payday lenders have long been among the few available options. They are ubiquitous in the U.S., with an estimated 13,700 storefronts in 2018, many in low-income and Black communities. Although 18 states and Washington, D.C., have strong interest rate caps on payday lending, in others some lenders charge annual interest rates that surpass 600 percent.
