Payday lenders targeting low-income people is nothing new. The short term, high interest loans, which are often catered to minorities in rural areas, have the potential to create a spiral of debt that many struggle to free themselves from.

In 2018, for example, over 33,000 payday loans were taken out every week in Alabama, according to Alabama Appleseed, a Montgomery-based social justice advocacy group. That’s 1.7 million loans a year, generating over $100 million in fees. The situation is similar in the rest of the South. In South Carolina, nearly 700,000 loans were taken out in 2018 by 86,000 different borrowers.  

The Consumer Finance Bureau found that 1 in 4 payday loans are borrowed nine times and borrowers take five months to pay the loans off – resulting in an average of $520 in finance charges per customer. 

And this trend has only got worse during the pandemic. Amid unemployment levels not seen since the Great Depression, the regular use of payday loans tripled as people with few other banking options scrambled to cover the basics, such as food utilities and rent, according to Gusto, a nationwide human resources company. 

The loans have historically and disproportionately targeted low-income workers, people of color and women, according to a Pew study. The problem is exacerbated by the lack of traditional financial institutions in African-American neighborhoods, where people have among the lowest credit ratings, highest debt collection rates and subprime credit score rates, and use of high-cost payday and other alternative financial services (AFS) loans.

Currently, few Southern states offer any protections to people taking the loans and the interest charged is some of the highest in the country. Lenders in Texas can charge up to 664%, the highest nationally, while similar companies in Florida charge 304%, the lowest of the Southern states.

Georgia, Arkansas and North Carolina do not allow payday loans, but under certain conditions allow title loans and small consumer loans. 

And despite the high interest and increased business over the last year, payday loan companies took $500 million in federal pandemic relief. 

While low-income people may feel trapped by their circumstances and lack of traditional financial institutions, there are alternatives to borrowing from a payday lender.

Consider looking for local nonprofits and charities to help with getting things like groceries or gas. Or maybe you just need help with a bus ticket to get to a job interview. You can use this link to search for a charity or non-profit based on your need.

If you’re willing to wait a few days for a decision on a traditional loan, credit unions can be a helpful low-cost alternative. Some credit union even offer products similar to payday loans. Those have higher interest rates than regular loans but are much cheaper than the predatory, high interest alternative. You can research credit unions here.

Bad-credit loans are also a much better option and the financial institution may allow you to pay off the loan over a number of years. You can also pre-qualify without hurting your credit score and you may be able to have the money put in your account within a few hours. Here’s a list of current bad-credit loan providers.

If you have a qualifying car, consider Uber or Lyft. You can also join one of the many grocery shopping services, where you shop and deliver groceries to customers for pay and tips. Instacart and Shipt are among the most popular services. In addition, some thrift stores will pay you cash for clothes and shoes you no longer want.

A lending circle may not meet your short term needs but might be a good choice as long as you’re also willing to help people financially when they need it. Usually the circles are formed with people you trust and can work in a variety of ways. Some lending circles raise money for one person every month, helping pay for an unexpected expense. Others ask that everyone contribute a percentage of their paycheck each month that is then placed in a fund. The fund can be used when needed by the members. Lending circles can also help build credit when done through a financial services website. Visit Mission Asset Fund for more on how the circles work. 

Medical debt can be expensive and overwhelming. Most doctors offices and hospitals are willing to structure a payment plan and some even offer credit cards with zero-interest promotional periods. This gives you time to pay back the money. Finding a medical bill advocate could also help reduce costs. They usually help negotiate bills and spot costly mistakes.