Cue in the music from the movie “Jaws” as the payday loan is being resurrected in Arizona. According to the Arizona Republic, the House Ways and Means Committee is working on passing a bill that makes charging usurious interest rates legal in Arizona. A bill that allowed triple-digit financing was rejected in committee prior to this latest proposal.
The proposed legislation allows lenders to charge rates that are translated to an APR of 204% over a 24-month period. That means taking out a $2,500 loan could cost over $10,000 to pay off, and that does not even include fees. While Arizonans abandoned this type of predatory financing in 2008, the concept has re-emerged.
Cynthia Zwick of the state’s Community Action Association said the loans are referred to as flex loans, but the flex loan product is essentially a payday loan. While some legislators condone the financing as helpful to people who live day to day, other lawmakers and payday loan critics say there are better ways to help people to obtain credit.
Alternatives to payday loans can include the following –
- Negotiating a payment plan with a creditor
- Charging the amount needed to a credit card
- Receiving an advance from an employer
- Using your bank’s overdraft protection
- Obtaining a line of credit
- Borrowing cash from a savings account
- Asking for a loan from a relative
- Applying for traditional financing
- Asking for more time in which to pay a bill
- Taking out a cash advance on one’s credit card
All of the above alternatives are suggested as the interest is far less than a payday loan or the flex loans interest rate. However, the reason people often choose to take out a payday loan is because of the ease in getting the financing. Even people with poor credit scores normally qualify. Typically, the only requirement that a person needs is to have a source of income, bank account and be over the age of 18.