Consumers continued to face higher prices across the board in April. The Department of Labor reports that its Consumer Price Index (CPI) rose 0.3% from March to April and has risen 8.3% in the last 12 months.
Although still high, April’s inflation rate was lower than March’s 1.3% increase and the 8.5% annual inflation rate.
Consumers paid more for housing last month, with the cost increasing 0.5% since March and 5% in the last 12 months. Food costs were also higher. Gasoline prices actually fell 6.1% since March, but as all motorists know, they rose again in May.
For consumers on fixed incomes or those living paycheck to paycheck, the rising cost of living can create significant challenges. Many personal finance advisers worry that rising prices will push some people to take out payday loans to try to make ends meet.
“Inflation is making it much more expensive to buy everyday items like gas and groceries, and for consumers already struggling to make ends meet, payday loans may seem like the way to stay afloat,” Annie Millerbernd, NerdWallet’s personal loan expert, told ConsumerAffairs. “But we know that payday lenders build their business on people who have to borrow over and over again because they can’t pay off the first loan.”
To counter the loan repeat cycle, 16 of the 26 states that allow payday loans have adopted reforms that require lenders to offer borrowers free extended payment plans. but a recent report by the Consumer Financial Protection Bureau (CFPB) found that many borrowers continue to pay high rollover fees even with this protection.
Before going to a payday lender, Millerbernd says consumers should explore all other options.
“If a friend or family member can lend you some extra money, it’s a much safer option,” he said. “You can also try local charities or nonprofits, which can help with essentials like food.”
If you must borrow to make ends meet, Millerbernd suggests considering a loan that can be paid off in installments rather than all at once. Personal loans are often a better option, as they have lower interest rates and the loans can be repaid in fixed installments over time.
“Buy now, pay later loans can be a way to pay for some of those regular expenses without a credit check, just make sure you have a plan to pay it off on time,” Millerbernd said.