How to Avoid Payday Loans in Illinois
Inside Subprime: Nov 2, 2018
By Lindsay Frankel
In Illinois, 12.6 percent of people live in poverty. The state also has one of the worst unemployment rates at 5 percent. With so many Illinoisans struggling to make ends meet, it’s no wonder that more than 58,000 Illinois residents used payday loans in 2017. These short-term, small-dollar loans appeal to people who need cash quickly but have bad credit. Unfortunately, they’re extremely costly. The Illinois Attorney General warns that payday loans can carry annual interest rates of up to 400 percent, even with laws in place to protect borrowers from predatory lending practices.
What laws protect consumers from payday lenders in Illinois?
Under the Payday Loan Reform Act, you can’t borrow more than 25% of your monthly income, with the maximum loan amount capped at $1,000. Lenders can’t charge fees above $15.50 for every $100 borrowed, and unlimited rollovers aren’t allowed like in some other states. You also have the right to request an interest-free, 55-day repayment plan after 35 days of outstanding debt. Even with these protections in place, Illinoisans spend more than a half billion dollars annually on fees associated with payday loans. That’s why dozens of Illinois organizations came together in March, urging lawmakers not to repeal the Consumer Financial Protection Bureau’s payday lending rule, which would protect consumers nationwide.
What other resources are available in Illinois?
While most people use payday loans to cover recurring living expenses, unexpected costs can make matters worse. To avoid taking out a payday loan to cover a healthcare emergency, check to see if you are eligible for financial assistance, like Illinois Medicaid. There are also a number of free and sliding-scale health clinics throughout Illinois, so you may be able to receive treatment without needing to borrow money.
If you’re facing eviction, you may qualify for rent assistance from the state. Low-income households may also be helped by the Low Income Home Energy Assistance Program. Local nonprofits such as The Salvation Army may also provide assistance, whether you need help with rent or utility bills.
The Supplemental Nutrition Assistance Program assists low-income families with the cost of groceries. If you’re struggling to cover the cost of food for your family, check to see if you or your children are eligible for this program.
What are some alternatives to payday loans in Illinois?
Some Illinois employers may offer on-demand pay or be able to help with an advance from your next paycheck. While this won’t work repeatedly, it’s a good option to try in an emergency. If that’s not an option and you don’t have family or friends you can turn to, consider a lower-cost installment loan. Unlike payday loans, these loans will help you build your credit score, allowing you better access to other forms of credit in the future. You’ll also be able to avoid the abusive collection practices often associated with payday lenders and enjoy a higher level of customer service.
Ultimately, your best defense against needing to borrow is to secure an additional source of income and set up a savings plan. If you’re able to set aside a small amount each month in a savings account, you may not need to borrow money when an emergency arises. But if you’re in a temporary bind, know that there are alternatives to payday loans, and you should explore these options before turning to a payday lender in Illinois.