INDIANAPOLIS — Amid the highest inflation in four decades, financial experts urge consumers to use any option to afford their bills – besides a payday loan. These loans boast a “cash fast” option, but they often lead to a dangerous debt spiral.
“So, you can really get yourself in a cycle of debt because it’s so much to pay back,” Andy Mattingly, COO of Forum Credit Union, explained. “Then, you’re just constantly borrowing every week or every couple of weeks. So, you can just get in this cycle, and you can’t get away from it.”
Payday loans are generally short-term, high-interest loans that are usually due on your next payday. Experts said these should be your last option, and even personal loans are a better option.
Analysts explain personal loans work for some needs like a car repair that’s a couple of thousand dollars.
“Maybe take 12 months or 24 months to pay that back,” Mattingly said. “That’s a good opportunity to do that.”
Your Money Line CEO Peter Dunn adds a temporary second job can make ends meet these days.
“There’s an actual problem that needs to be solved and that additional income for two months, one month can actually solve that problem,” Dunn said.
Dunn reminds Hoosiers that while inflation is impacting all of us, it does not impact every financial corner. Things like rent and mortgages and car payments aren’t changed by inflation because they are a part of a contract.
Dunn said it’s consumer spending that should be pulled back.
“Grabbing your bank statement, looking through it, categorizing your spending is an important thing to do,” Dunn said.
These experts add now is not the time to pull money out of your 401K or other retirement accounts.
“People panic in times like these so they’ll pull money out of retirement investments so not only do they have the losses but then they’ll also have a tax obligation and then a penalty for taking the money out early,” Dunn explained.
Dunn added now is not the time to stop investing your money.
“I think stopping investing is a huge mistake right now because you should be buying low,” he said.
Finally, Dunn said now is not the time to pay more on a mortgage.
“Let’s say you have some fixed-rate debt, like a mortgage, it doesn’t make a lot of sense to pay extra on your mortgage right now,” Dunn said. “That’s typically a reasonable thing to do, right now it doesn’t make a lot of sense because it’s a fixed low rate.”