ST. PAUL, MN — Despite a temporary end to the government shutdown announced Friday, federal workers who didn’t receive paychecks for the past 35 days may be looking into short-term loans to help pay bills.
However, the Minnesota Commerce Department is asking those workers, as well as all consumers, to be careful if you are borrowing money from unlicensed lenders who advertise and offer short-term, payday, or installment loans online.
Officials say anyone borrowing money should avoid doing business with unlicensed online lenders, which often charge interest rates and fees which exceed what is allowed by state law.
According to the Commerce Department, some of those lenders operate from overseas, or may claim sovereign immunity from state and federal consumer protection laws. The Department reports borrower may have little or no recourse if they have a problem with how their loan or debt is handled.
The Commerce Department has offered the following tips for anyone looking for short-term loans:
- Consider alternatives. Short-term loans tend to be an extremely costly way to borrow money. If you are having trouble paying bills, contact your creditors to request extensions or negotiate repayment schedules. Some local banks and credit unions are offering special short-term loan options to customers who are federal workers. You may also want to talk to a family member or friend about short-term help.
- Verify that any lender is licensed in Minnesota to provide consumer small and short-term loans. Check the License Lookup tool on the Commerce Department website. The company should have a “Consumer Small Loan,” “Industrial Loan and Thrift” or “Regulated Lender” license. If the lender is not licensed, don’t do business with it.
- Read the fine print. No matter who you borrow from, always get a statement that clearly details all the costs of the loan. Be sure you know how much you will owe, when payments are due and how they will be collected. Never sign or agree to anything you do not fully understand.
- Borrow only as much as you are able to repay. When you take out a loan, make sure you know how you will repay it by the due date. Interest and fees add up fast when a loan has to be extended, or “rolled over.”
- Contact a local consumer credit counseling service. Assistance is available from nonprofit groups that, for no or low cost, can help you with budgeting, debt repayment and credit repair. To find a service near you, check with the National Foundation for Credit Counseling.