Desperate for a few hundred dollars to tide them over until payday, many Americans resort to cash or check advances—also known as payday loans.
But the vast majority of these short-term advances are not paid off within two weeks, and in fact are rolled over or followed by another loan, according to the Consumer Financial Protection Bureau. Plus, few borrowers lower principal amounts between loans. The upshot can be a vicious, downward cycle into deeper debt.
Just ask Katrina Gilbert.
The 31-year-old single mother of three recently took out a $300 payday loan to make the rent in Tennessee. It took her weeks to pay off the advance that ultimately cost her double the initial loan amount. Gilbert shared her experience—and those of other working poor Americans—to a standing ovation at the United Nations in New York this week. The growing problem of America's unbanked and underbanked was part of a summit at the UN on seeking solutions to broad economic and environmental challenges.
"We're doing the best we can," Gilbert said. "We too deserve a better shot at the future."