Skip to content

How to Avoid Payday Lenders

According to the Center for Responsible Lending, the typical rate for a 14-day loan advertised by the largest payday chains in the state of Tennessee is 460% (based on a $300 loan). Additionally, Tennessee is one of the states with the most payday loan shops, with 5 payday lenders per 10,000 households. Southern states are among the most targeted for these high-cost, low-dollar loans.  

 Further research conducted by the Pew Charitable Trust states that the average borrower takes out 10 loans and pays 391% in interest and fees. 75% of the payday industry’s revenues are generated by repeat borrowers. To avoid using a payday lender, consider these options:  

1. Schedule free Financial Counseling or Financial Check-Up  

If you’re struggling to make ends meet, financial professionals are happy to help. Many credit unions or financial institutions may have certified financial counselors that members can meet with to discuss their financial concerns and make plans to achieve their goals. It may be intimidating at first, but certified financial counselors are available to help you develop and maintain a spending or debt payment plan, not to push any unwanted products or services on you.   

2. Use Budgeting Resources  

In a digital-first society, there are a host of free resources to help individuals manage their money. One resource called Money Management is provided for free to Leaders members. Money Management offers a spending tracker, auto-created budgeting tools, debt payoff forecasting, cash flow calendars, and email or text alerts. Additionally, there are resources like YNAB (You Need A Budget), Every Dollar by Ramsey Solutions, or Pen and paper may be your thing and that works too!   

3. Utilize alternative small-dollar loan options

In the event of a financial emergency, there may be other alternatives to consider before turning to a payday lender. Local non-profits may offer emergency financial assistance for utilities, rent, or medical assistance. Using a credit card could be an option with a lower rate if you make a manageable plan to pay it off. Some checking accounts offer overdraft privileges that allow users to take their account balance into the negative to use the extra cash in case of emergencies. The funds do have to be paid back but the fees can often be lower than a payday lender. Always be mindful of interest charges or fees and have a plan to repay any debts. Be sure to check with your credit union as they may have a small dollar loan option to help you in case of an emergency.   

About Leaders Credit Union

Leaders Credit Union is a member-owned financial cooperative, one of the largest and most stable credit unions in West Tennessee. Leaders exists to serve the needs of its members and lead the way on their behalf. Leaders is placed in the top 10% of credit unions nationwide by Leaders is an Equal Housing Lender and is federally insured by the National Credit Union Administration. For more information about Leaders Credit Union, visit