During hard economic times many consumers may run out of money before the next payday. When this happens some people turn to payday loans.

Eileen St. Pierre, Oklahoma State University Cooperative Extension personal finance specialist, said a payday loan is a small, short-term loan used to cover a borrower’s expenses until his or her next payday.

“Payday loans are normally due every week or every other week,” St. Pierre said. “With these loans borrowers get into financial trouble and it usually seems other debts like credit cards or mortgages tend to be ignored.”

Research found payday loan applicants who received the quick cash after their first application were significantly more likely to file for Chapter 13 bankruptcy than those whose initial application was denied.

Furthermore, research indicated payday loans coupled with interest payments may be sufficient to tip the balance into bankruptcy for a population that is already severely financially stressed.

“Let’s say you take out a $100 payday loan for seven days. You are charged a $25 fee for this. You may not realize, but the $25 is a form of interest,” St. Pierre said. “So when you get your paycheck at the end of the week, you need to pay back $125. Pay off this loan and never return!”

However, many who take out payday loans do return in need of cash.

“Each week, people end up taking out another $100 loan. If the cycle continues for each successive week the annual interest rate on this would be 1,303.57 percent,” she said. “Payday loan providers are required to provide information to consumers on payday loans, this information can be found at mypaydayloan.com.”

St. Pierre offers these tips to increase emergency savings and reduce the need for payday loans:

• Increase income by working overtime if available, get a part-time job and put that money into a savings account. Sell what you can, hold a garage sale; try to avoid pawn shops if at all possible.
• Decrease monthly expenses anyway you can. Lower the thermostat a few degrees, turn off the heat when you are not home, turn off the lights when you leave a room, shut off the television when you are not watching it. Reduce or cancel cable service or cell phone service.
• Look for ways to bundle services together.
• Shop smarter. Try to use coupons and buy more generic-brand products. Try to generate enough savings using coupons to cover the sales tax on groceries.
• Change driving habits. Reduce gas consumption by combining shopping trips. Carpool with friends, walk when you can or if your community offers a bus service commute that way.

“You can also see if there are programs offered by your church or local community that can help you during this difficult time and help you manage your finances,” she said.