Consumers across the board faced higher prices in April. The employment office reports that its Consumer Price Index (CPI) rose 0.3% in March-April and 8.3% in the trailing 12 months.
The inflation rate in April, while still high, was below the 1.3% increase in March and the annual inflation rate of 8.5%.
Consumers paid more for housing last month, with costs up 0.5% since March and up 5% over the past 12 months. Grocery costs were also higher. Gasoline prices have fallen 6.1% since March, but as any motorist knows, they rose again in May.
For consumers with fixed incomes or those living paycheck to paycheck, the rise in the cost of living can present significant challenges. Many personal financial advisors worry that rising prices will cause 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 who are already struggling to make ends meet, payday loans seem like the way to stay afloat,” says Annie Millerbernd, NerdWallet personal loan expert, said ConsumerAffairs. “But we know that payday lenders build their business around people who have to borrow over and over again because they can’t pay back that first loan.”
To counter the cycle of repeated borrowing, 16 of the 26 states that allow payday loans have passed reforms that require lenders to offer borrowers free enhanced payment plans. But one last report The Consumer Financial Protection Bureau (CFPB) found that even with this protection, many borrowers continue to pay high rollover fees.
Before going to a payday lender, consumers should evaluate all other options, says Millerbernd.
“If a friend or family member can lend you some extra money, that’s a much safer choice,” she said. “You can also try local nonprofits or charities that can help with basic necessities like food.”
If you need to borrow money to make ends meet, Millerbernd recommends considering a loan that can be paid off in installments rather than all at once. Personal loans are usually a better option because 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 afford some of those regular expenses without a credit check. Just make sure you have a plan to pay it off on time,” Millerbernd said.