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Payday loans create a cycle of debt

JOINT BASE SAN ANTONIO - RANDOLPH, Texas -- A person’s downward spiral often begins with an unexpected expense such as a car repair or home appliance replacement. A lender advertises quick cash with no credit check.

Sounds perfect, right? Besides, this loan is only for two weeks; it will be paid-off when the next paycheck comes, right? Anyone could have trouble managing today’s expenses while paying off yesterday’s loan and a small, short-term loan can rapidly balloon to a large debt.

Bobby Williams, financial counselor at Joint Base San Antonio–Randolph’s Military and Family Readiness Center, said that if the initial loan is not paid, the loan is often re-issued with the previous loan and fees now serving as the principle.

“It quickly gets out of control,” Williams said. “If a loan is re-issued several times, the effective interest rate can be 400 percent”

The free financial counseling services offered on-base can assist Airmen in resolving debts and creating strong financial habits. Most military installations offer free assistance with personal finances in addition to the four hour training block required of every Airman upon arrival at their first permanent duty station.

Tony Davis, financial advisor at Joint Base San Antonio–Lackland’s M&FRC, said he sees Airmen every month regarding payday loans.

“I encourage service members to use base services first,” Davis said. “There are programs Airmen can participate in such as the falcon loan, an interest-free loan of up to $750 for emergency situations. The falcon loan is offered by the Air Force Aid Society and designed to meet the short-term financial needs of active duty Airmen who might otherwise have to resort to a high-interest lender.”

Military members can schedule an individual and completely confidential meeting with a financial advisor through the M&FRC. Advisors like Davis and Williams are available for debt counseling or to discuss any other aspects of individuals’ finances. The M&FRC staff members offer classes focusing on financial topics such as car buying, understanding credit scores and planning for a child’s college expenses.

“Many service members come into the military with significant financial obligations,” Williams said. “They see an opportunity to earn a regular paycheck and take care of their family or pay outstanding college loans and they are already stretched.”

Williams encourages Airmen to spend within their means and even track how they spend their paycheck.

“I encourage Airmen to come see us so that we can perform a thorough financial examination of their situation, down to how often they eat fast food or buy a cup of coffee,” Williams said. “Then, we will have a clear picture of where every dollar is going and we can put together a spending plan. I don’t care for the word, ‘budget.’ A spending plan says, ‘This is where I am and where I need to get-to.’”

Davis and Williams both encourage personnel to return to M&FRC to meet with a financial counselor from time to time for check-ups to ensure those strong financial habits remain in-place.

Williams said he has one final, important piece of advice for all Airmen.

“Please come to see us before you buy a car,” he said. “Buying a car is a high-stakes game and we can teach you how to play. We’ll help you look at what type of vehicle you are purchasing and why, what the vehicle is worth, financing and more.”

Airmen and family members interested in obtaining more information on free financial planning services are encouraged to contact their local Military and Family Readiness Center staff.