Payday loans: How they work, knowing your rights, and knowing the alternatives

June 12, 2022 | Posted in Financial Stability |

What is a payday loan?

  • *  A short-term, high-cost loan usually available at a storefront or online 
  • *  Average payday loan interest rate in Texas is 660% (Texas does not cap interest or fees) 
  • *  To repay the loan: write a post-dated check for the full balance or provide the lender with ACH authorization (authorization to electronically debit the funds).  
  • *  If you don’t repay the loan: lender can cash the check or withdraw money from your account.  


Know your rights: 


Alternatives to payday loans:

  • *  Non-profit organizations, employers, or community groups sometimes offer advances or emergency credit 
  • *  Banks or credit unions may offer less expensive alternatives or a credit card may be an option 
  • *  You may be able to negotiate with the creditor or debt collector for the bill you owe and set up a smaller repayment plan 


If you find yourself stuck in a payday loan, there are options available: 

Fresh Start Loan

    • *  Prosper Financial Wellness offers a Fresh Start Loan to you get out of predatory loans such as payday and title loans. 
    • *  This flexible loan never charges extra fees. In fact, it offers discounts if borrowers are able to pay back the loan early. Fresh Start also offers APRs way below typical payday and title loans, regardless of the borrower’s credit score. 
    • *  It reports to all three main credit bureaus: Experian, Equifax, and TransUnion 
    • *  To apply, schedule an appointment with a Financial Coach, by visiting or calling 737-717-4000. 
    • You may qualify if you: 
    • *  Are working toward goals with a Financial Coach Currently have Payday and/or Title loans with a total balance up to $1,000 
    • *  Have a valid Social Security Number 
    • *  Have a checking account that you use regularly 
    • *  Have online banking set up with your bank or credit union (a Financial Coach can help set this up) 
    • *  Have regular take-home pay