Payday Loans Aren't Worth the Cost
There are better alternatives to quick cash.

Submitted by ltownsend on September 4, 2020

Need a new loan?

When money is tight and you don’t know if you’ll be able to make your rent or keep the lights on, you start looking for ways to find quick cash. You can sell some personal items or ask family members for a loan, but whatever you do, don’t go to a payday lender. It’s a trap that will hold you captive far too long and cost you many times more than you borrow.  Happy family.

These loans are popular because they are extremely easy to get – they don’t require a credit check or collateral. A typical loan is for 14 days (the length of a pay period) and you’re expected to pay it back in full when you receive your next paycheck. However, payday lenders charge a fee of 15% to 20% for every $100 borrowed. For a two-week loan, that works out to an annual interest rate well over 350%. Most payday borrowers can’t pay the loan in full when it becomes due, so they refinance the loan and a new finance charge is added to it. 

Payday Loan Example:

Let’s say you borrowed $300 with a 15% finance charge for a two-week period. On your next payday, you would have to pay $345 ($300 x .15) to the payday lender. If you can’t pay it in full, you are still required to pay the finance charge when it’s due. In that case, your $300 loan gets refinanced into a new loan and assessed a new fee. If you can’t pay that amount in the next two weeks, you still owe the additional fee. If this scenario continues for three months, you will pay more than $270 in fees for the original $300 borrowed. Statistics show that the average pay day loan borrower is in debt for five months.

What are your alternatives? 

  1. Start by asking your family and friends for help. Some may be able to lend you money until you get back on your feet financially. Make it clear to them that you will pay it, perhaps by drawing up terms stating a date you will pay it back in full, or whether you will pay a percentage back on each payday. If they don’t have money to lend, they may be able to help by driving you to work or even letting you move in with them temporarily.
  2. Visit your local credit union. At Skyward, we have personal loans, low-interest credit cards and lines of credit that can possibly help you to get through those lean times. Regardless of your credit rating, we may be able to find a workable solution for you. Talk to one of our loan officers before you seek a loan from a payday lender—the interest rate will be far better.

    Credit Union Loan Example:
    A $300 loan for 3 months at 20% interest will have weekly payments of less than $25 per week and you will only pay a little over $8.00 in total interest over the term of the loan.
  3. Contact local resources. Organizations in our community are available to help with financial assistance. You can call the Center of Hope (in Wichita) for financial and material assistance for essential needs. Or, dial 2-1-1 for help from the United Way of the Plains and they will connect you with the resources that best meets your need. See a list of additional community resources available at

Know that when you are hit with a financial emergency, there are better options for you than a payday loan. Your credit union is committed to helping its members throughout their lives, through the good times and the bad. If you need a loan, talk to us to discuss how we can help you get through a rough patch safely.