Borrow now ... Pay later?

With prices of gasoline, groceries and other expenses on the rise, Shoals residents are finding their money disappearing quicker, and some are looking at different options for raising fast cash.

New payday loan businesses continue to open in these uncertain economic times, but experts warn borrowers to know exactly how a payday loan works before forging ahead.

"I've heard all the reasons for needing some quick cash," said Michael Owens, manager of Alabama Title Loans on Woodward Avenue in Muscle Shoals. "One guy who works in Huntsville came in needing just $100 for gas."

Owens said Alabama Title Loans typically does its best business at the end of the year as customers seek money for holiday purchases. Owens said that most years, the tax season slows business, and then customers start returning around summer as vacation season kicks in.

It was different, this year, however.

"This year it didn't stop," Owens said. "Steady business with a small dip for tax returns. I'm back at my Christmas numbers."

Payday advance loans can be a valuable way to manage an emergency. But if the borrower is not careful, quick loans like these can create a cycle of debt that is difficult to break. In hectic times especially, it is important to make good choices for managing and paying debt.

"We got $200, and only have to pay back $220 in two weeks," said Timmy Brigner, a customer at Advance America, another payday loan business. "Gotta pay the bills."

There are many alternatives to payday loans such as small savings accounts or rainy-day funds, salary advances from employers, credit card advances, extended repayment plans with creditors, and loans from friends, relatives, religious institutions or social service agencies. In addition, many lenders have developed lower-cost alternatives to payday loans that have better repayment terms.

No matter which solution is chosen, read the fine print and understand the ramifications of the debt, along with the fees and costs that are associated with that debt,

Payday lenders say they are like any other company: They need money to stay in business. They need to make enough profit on loans to cover bills, payroll and other overhead costs. They also need to be able to recover loans that are not repaid.

"This is a little like a store that charges higher prices to cover the losses from shoplifting," said Peter Williams, a professor of economics at the University of North Alabama. "Those of us who make honest purchases are paying a higher price because of the shoplifters."

According to the Center for Responsible Lending, 90 percent of revenues for businesses that specialize in payday loans are based on fees collected from borrowers. The typical payday borrower pays back $793 for a $325 loan. Payday lending now costs American families $4.2 billion per year in excessive fees, according to the center.

Alabama regulation from 2003 states that licensed payday lenders can charge up to 17.5 percent of the amount advanced to the borrower.

This means that for every $100 borrowed, $117.50 is owed. The maximum amount that may be advanced in any transaction is $500. Title loans have different legislation, the cap being 25 percent.

Typically, the borrower will write a check for the amount of the loan and associated fees to the lender, and post-date the check to the time he receives his next paycheck. If the borrower cannot repay all his loan, he may repay a portion and roll the loan over to the next pay period.

After an initial loan period and one rollover with the same customer, the full outstanding amount of the loan is due. If the customer is unable to repay the remaining balance in full, the borrower has the option of four equal monthly installments for the remaining balance. The lender cannot start any civil actions to collect the remainder through courts or collection agencies until the borrower has been notified of his rights, and has had 15 days to respond.

"Sometimes you get title-hoppers," Owens said. "(Which refers to) somebody who can't pay the full balance they owe at one place, so they go down the street to pay off the first loan with a second."

On the 10-mile stretch of U.S. Route 72 between Cox Creek Parkway in Florence to Joe Wheeler Highway in Tuscumbia, 30 payday lending establishments line the side of the road. There are 52 in the area, according to businesses listed in local telephone books.

All payday lenders in the area that had been members of the Shoals Chamber of Commerce have dropped out.

"They joined to have a ribbon-cutting ceremony, then left," said Barbara Hunt in the business office at the chamber.

Listerhill Xpress on Woodward Avenue is the newest foray into this market. It opened a Better Choice Loans earlier this month offering advance loans from $250 and up, instead of traditional loans that customers may not be eligible for.

"We want to lower the fees people are paying at these other places," said Keith Prince, manager at Better Choice. "(We want to) support our members and help them out with these smaller loans."

Payday loans can be a quick fix for individuals who find they need fast money for a brief time. But they certainly aren't the only option.

"I know every one of my customers by their first name," Owens said. "But this is not supposed to be a long-term solution, and most of my customers are responsible enough to not have a problem."