Installment Payday Loans are Still Payday Loans, and they are even more Expensive
Payday loans have been bad news for a lot of Michigan consumers. Payday lenders prey on people who have bad credit or no credit and need money fast. Also, the interest rates attached to these loans are typically outrageous. In fact, the average interest rate on traditional payday loans is around 400%. So even if a consumer is able to pay back a $1,000 loan in two weeks, they’ll end up owing about $150 in fees. That’s a fairly significant hardship for any Michigander. Sadly, a lot of payday loan borrowers end up defaulting, which makes their bad credit even worse. Another likely outcome is for Michigan consumers to get caught in a payday loan cycle.

Recently, providers of something called an installment payday loan have claimed that these loans are better for consumers. However, simple math proves that these loans might be even worse for consumers with bad credit and financial emergencies.

How Payday Installment Loans may be More Harmful to Michigan Consumers than Traditional Payday Loans

Payday loans and payday lenders have been under heavy scrutiny for years. Several states have banned payday lending, and the Consumer Financial Protection Bureau want to impose more regulations on the entire industry. Because many consumers know that these types of loans can be financially devastating, they have fallen in popularity. You may have noticed a few empty storefronts around your part of Michigan where payday lenders used to be. Enter payday installment loans. These loans resemble payday loans, but they come with lower interest rates and the option to make payments over an extended period of time.

On average, payday installment loans come with interest rates that are around 268% one-year terms. Therefore, if a Michigan consumer needs to borrow $1,000 and they pay their payday installment loan off within a year they’ll end up being charged about $1,942 in fees. That’s $942 for the “convenience” of borrowing money to pay a bill, cover rent, get a car repaired, or buy groceries. This hardly seems like a good financial model for a Michigan resident who may already be struggling to make ends meet.

How Michiganders with Bad Credit can Avoid Payday Loans Altogether

The scary part is that installment payday loans are not heavily scrutinized by regulators. It falls on the consumer to make an educated decision about the potential dangers involved with these loans.

Realistically, though, Michigan consumers with bad credit should do two things in order to avoid having to take out payday loans of any type. First, they should work on improving their credit scores so that they’ll have access to regular personal loans with reasonable interest rates if they need to borrow money. Second, all consumers, regardless of their credit score, need to build up an emergency fund to have on hand in case an expected expense comes up.

Credit Repair for Michiganders with Bad Credit

A good way to start repairing bad credit is to get current with ALL of your monthly bills. Late payments can hurt your credit score, and incurring late fees can make it harder to meet your budgeting goals. Next, you should take a look at your credit card balances. If you’re using more than 30% of any of your credit lines, you should work on paying down your balances as quickly as possible. Using too much of your available credit can cause your credit score to drop. Conversely, bringing your credit utilization rate (CUR) down to 30% or less should give your credit score a boost.

If you don’t have a credit card and your credit score is too low to qualify you for an unsecured card, getting a secured credit card may be a good option. Opening a secured credit card account requires a cash deposit, and the amount of this cash deposit becomes your spending limit. You can use this card like a “regular” credit card in order to build up your credit score without having to worry about accumulating debt.

The Free and Legal way to Get Better Credit

All Michigan consumers should regularly check their credit reports for errors. Up to 80% of consumer credit reports contain inaccuracies of some type, and many of these mistakes can cause credit scores to be lower than they should be. The Fair Credit Reporting Act (FCRA) entitles all consumers in the U.S. to error-free credit reports. So if you find inaccuracies on one or more of your credit reports, you have the right to dispute these errors and have them removed. The good news is that Michigan consumers can get a FREE credit repair lawyer to help them through the credit error disputing process.

Don’t let errors on your credit reports bring your credit score down. At Michigan Consumer Credit Lawyers, we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? All of our fees come from the defendants in settled cases. This is why our clients pay nothing for the work we do.

Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (248) 353-2882 or contact us on our contact page.