I know you read the title of this article and said, “Payday loans hurt everyone, not just African Americans,” and you would be correct. However, African Americans seem to have a higher level of poverty than others; even those blacks who are earning substantial income. Think about it if the National Average for Unemployment is 8.6% compared to the 14.6% unemployment in the African American community; that is a true clear picture that we as a race are in trouble. As a race we are one paycheck from living in poverty.

Payday loans high interest rate, and the average consumer has 11 transactions. To summarize payday loans are not healthy for anyone, especially African Americans. Here are few reasons why; beginning with the interest. The interest rates are over the top; 911% for one week loan; 456% for a two-week loan and 212% of a one-month loan. Secondly, payday loans are deceptive. By asking the customer to turn over a post-dated check, customers are harassed by illegal threats of collection practices. The payday “Loan Officer” threatens the customers with jail if the check bounces; and payday lenders usually deposit the check before the agreed upon date causing the check to bounce. For instance, the customer borrows $100 for two weeks; the finance charge is $15, which is 391%. The finance charge will increase $60 on a $100 loan if the customer rolls over the loan three times.

According to PewReserch dated July 26, 2011, the net worth of African America is $5,677, Hispanics $6,325 and Caucasians $113,149 Combine that African Americans’ net worth with the unemployment rate of 11.6% and you get a total of unhealthy finances not including payday loans. Bounce a check enough times; the bank or credit union will close your account. Not having a bank account is frustrating. There are over 1 million people who are unbanked, with African Americans, Hispanics and Native Americans being the larger potion of that number.

Although there has been a bill introduced by the Senate to regulate payday loans, it is up the individual to work on their financial shortness. First, try to negotiate a payment plan with creditors; try to obtain a secured credit card. Next, apply for overdraft protection for your checking account.

These are only a few examples why African Americans should avoid payday loans and continue to work on building assets. Cash and credit are needed for economic security. Payday loans are not the way.

Anita Renee’ Johnson, is a Wealth Management Coach, with Anita R. Johnson & Associates.  If you have any questions or need help with financial planning in your personal or business goals, contact Anita.

916-452-4270  |  916-440-1233 (fax)


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