Payday loans may not be so tempting for Hoosiers as they once were

Payday loans — short-term loans of a few hundred dollars, due on your next payday — provide a quick solution to immediate financial needs but damage your financial standing in the long term, an Area Five Agency spokeswoman said. And she thinks more people are learning to stay away from the loans.

Those seeking a payday loan in the first place are usually between a rock and hard place, according to Elaine Zeider, manager of family services at Area Five Agency in Logansport.

"A lot of our families need cash now," she said. "When a family's in need, they typically go for that, which is the quickest to get the bills taken care of, keep the utilities on."

Two establishments in Logansport offer payday loans. Nationally, the median size of such a loan is $350, according to a study published in 2013 by the Consumer Financial Protection Bureau. In Indiana, payday loan sizes are capped by law at $550.

"The way these loans are always put out there," Zeider said, is that "payday loans are easy. Cash fast. Instant approval. Those are the types of things that draw people in — get it now."

The catch is the high interest rate. Financing fees on payday loans are limited by Indiana law. The first $250 of a loan is charged a 15 percent fee. Amounts above that up to $400 are subject to up to 13 percent in charges and portions beyond that can have up to 10 percent in charges.

So, if you're borrowing $300 to be paid back in two weeks, the fee is $44.

That works out to an annual percentage rate of 382 percent, a figure displayed on the website of one national payday lending chain.

"They're horrible," Zeider said of the interest rates. "...It's not a good option for families. They get into debt, and then if that [paycheck] isn't quite what they thought it was, they're left trying to pay even more."

Being unable to pay off a payday loan can leave someone taking out another payday loan to pay off the first one.

"It's like a snowball," Zeider said.

But, she added, it's a snowball fewer and fewer people are packing.

"I think people are starting to understand some of these payday loans. Really, I think it's about education people about what they are," Zeider said. "It might be quick but it might hurt you in the long run."

Instead, she thinks people are seeking assistance through Area Five and other local agencies. Once the immediate need is met, Zeider said, Area Five coaches families to help them avoid sinking into an emergency situation again and offers help building up some savings and overcome bad credit.

"We've at least got the basic needs for food, clothing and shelter identified. And from that point people can typically start to plan," Zeider said.