How to Avoid Payday Loans in Florida
Inside Subprime: Dec 13, 2018
By Lindsay Frankel
The economy in Florida is improving; the poverty rate dropped to the lowest level in a decade this year. But with 14 percent of Floridians still living in poverty and an unemployment rate of 3.4 percent, millions of residents still struggle to cover their everyday living expenses. Rising healthcare and housing costs put even more pressure on impoverished Floridians, and those with bad credit often turn to payday loans. These costly loans drained more than $2.5 billion in fees from Florida residents over the course of a decade. What’s more, the harmful financial impact of payday loans is disproportionately concentrated in communities of color, and a growing number of senior citizens are falling victim to these predatory loans.
What laws protect borrowers from payday loans in Florida?
Payday loans in Florida are limited to $500 with a term of 7-31 days. A central database ensures that borrowers only have one outstanding payday loan at a time, and fees are capped at 10 percent of the loan principal. But even with these protections in place, the effective annualized interest rate reaches 304 percent on average. And while payday loans are advertised as an emergency solution to bridge the gap between paychecks, payday lenders in Florida profit most when customers take out repeated loans. The vast majority (83 percent) of payday loans are issued to chronic borrowers who have taken out seven or more loans.
What other resources are available in Florida?
Low-income Floridians should seek assistance from government programs or nonprofit organizations before turning to payday loans. Check to see if you are eligible for Florida’s food assistance program (SNAP) or Medicaid, which can help defray the costs of food and medical care. You can also try visiting a local food pantry or sliding scale health clinic if you are struggling to cover costs.
If you’re facing eviction or need emergency assistance with rent or utility bills, there are several local agencies that can help, including The Salvation Army and United Way. Dial 211 to be connected with an organization that can help.
What are some alternatives to payday loans in Florida?
Your best bet to avoid borrowing is to secure additional income and set up a savings plan so that you can cover future emergency costs.
Floridians with bad credit might have trouble accessing traditional forms of credit. In this case, a no credit check installment loan is a much better option than a payday loan. These loans carry lower interest rates, have longer terms, and actually help build your credit, so you may be able to apply for a credit card in the future.