The Danger of Payday Loans (May 2014)
Recently an e-mail was received by some faculty and staff regarding applying for a cash advance loan. This e-mail was not sent or endorsed by the University. Due to the public nature of the University of Kentucky, outside companies are able to attain e-mail address for UK faculty, staff, and students. Some also send e-mails to random addresses at uky.edu in the hope that some do get through.
Financial planners will also sometimes mail employees information on financial seminars at locations such as the Boone Center to give the appearance that they are associated with the University when they are not. Fidelity and TIAA-CREF are the only two retirement companies that officially handle UK retirement accounts. The UK Human Resources Benefits office attempts to protect employees from these situations whenever possible. The University will pursue companies or individuals that falsely state they are associated with the University. If you receive one of these offers and are unsure of its validity, please contact me and I will investigate.
The danger of both of these solicitations is getting you to pay for things you may not really need. Payday loans are the most expensive way anyone can borrow money. Kentucky state law allows payday lenders to charge $15 per $100 borrowed. This results in an annual interest rate of 469% for a two week loan! By contrast, 30% would be considered a very high interest rate for a credit card. The larger danger of payday loans is that once someone is in the cycle of loans, it becomes very difficult get out. If you have spent $345 of your next check already, how are you going to make it then?
If you are considering a payday, look at other options that may be available. If you have had a recent medical or financial emergency, including a job loss, there may be resources that can help you get caught back up. If the problem is related to overspending or check garnishment, contact me for a meeting. I can help create a spending plan to help you get on top of your finances.
The MPM Group
115 Scovell Hall – HR Benefits