If you’re in urgent need of cash a local loan shop can seem tempting. However, their interest rates can be very high.
Loan shop staff will often talk of repayment as so many dollars a week, rather than focusing on the total you will pay back over time. They should tell you the total cost of the loan and clearly state the actual interest rate so that you have all the facts to compare.
It pays to avoid lenders that charge very high interest rates – especially if they’re offering money door-to-door and don’t have an office. These lenders can include ‘loan sharks’ who may use heavy-handed techniques to make people pay up.
Loan sharks often charge interest by the week on ‘payday’ and people can easily end up paying many times what they borrowed. It's common for interest rates on these types of loans to be several hundred percent each year.