Before you borrow: payday, title, rent-to-own and cash-advance apps

A payday loan is usually $500 or less and is due on your next payday, often two to four weeks out. The fee looks small until you turn it into a yearly rate: $15 ÷ $100 × 365 ÷ 14 days = about 391% APR.

Rolling it over is the trap. Where states allow it, you pay only the fee and the due date moves out, but the loan doesn't get any smaller.

Example (made-up numbers): you borrow $300 with a $45 fee. Two weeks later you owe $345 and can't cover it, so you pay the $45 and roll it over. Do that four times and you've paid $180 in fees over eight weeks and still owe the full $300.

Rules differ by state. Some states don't have payday lending at all, and others cap fees and loan sizes. Your state's financial regulator or attorney general can tell you yours.

• Title loans use your vehicle as collateral. Fees can run 25% a month, about 300% APR, and about 1 in 5 single-payment title-loan sequences ends with the vehicle taken. Lose the truck and you may lose the job it gets you to.
• Rent-to-own. Compare the total of payments with the store price. Example (made-up numbers): a TV with a $600 store price, rented at $20 a week for 78 weeks, costs $1,560.
• Cash-advance apps front part of your pay for a monthly membership, a fee for instant delivery, a "tip," or some mix. Each charge looks small. In one CFPB example, $8 in tips and fees on a $144 advance repaid in 7 days worked out to about 290% APR. Under current CFPB guidance, instant-delivery fees and voluntary tips on some of these advances don't count as finance charges, so they may not show up in any rate you're quoted. Do the math yourself.
• Buy now, pay later splits a purchase into a few payments. It's debt like any other, so avoid it. Three or four plans can land in the same week and eat a whole paycheck. myFICO says these plans don't currently affect FICO scores, though FICO has built scores that count them for lenders who choose to use them. If you already have some, nobody is adding them up for you, so write every payment into your budget.

If borrowing really is the only choice after the Four Walls, the phone calls and the help programs (lessons P101.9 and P101.10), look at a credit union Payday Alternative Loan (PAL):

• PAL I: $200–$1,000 for 1–6 months, after one month of membership.
• PAL II: up to $2,000 for 1–12 months, with no wait.
• Rate capped at 28%, application fee of $20 or less, and no rollovers.

Military families have more protection. The Military Lending Act caps most loans to active-duty service members and their dependents at a 36% Military Annual Percentage Rate, and military relief societies make interest-free loans or grants for emergencies.

1. Are the Four Walls covered, and did I call every creditor before the due date?
2. Did I check help programs, 211 and the benefit finder?
3. Can I sell something or pick up work?
4. Have I asked family, church or community?
5. If I still need a loan, is it a credit union PAL? What's the APR, and what's the total I'll pay back?
6. Is it a payday loan, a title loan, rent-to-own, a cash-advance app, a buy now, pay later plan or a rollover? Then the answer is no.

• NFCC: nonprofit credit counseling, 877-360-6322.
• Military OneSource: relief organizations and emergency financial help
• CFPB: What is a payday loan?
• FTC: What to know about payday and car title loans
• 211: call 211 for local help before you borrow.