Consumers continued to face higher prices across the board in April. The Labor Department reports that its Consumer Price Index (CPI) rose 0.3% from March to April and is up 8.3% over the last 12 months.
While still high, the April inflation rate was down from March's 1.3% increase and 8.5% annual inflation rate.
Consumers paid more for housing last month, with the cost rising 0.5% from March and gaining 5% over the last 12 months. Food costs were also higher. Gasoline prices actually fell 6.1% from March, but as every motorist knows, they are back up in May.
For consumers on fixed incomes or those who live paycheck-to-paycheck, the surge in the 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 who already struggle 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 folks who have to borrow again and again because they can’t pay off that first loan.”
To counter the repeat borrowing 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 steep roll-over 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 loan you some extra cash, that’s a much safer choice,” she said. “You can also try local nonprofits or charities, which may help with essentials like food.”
If you must borrow to make ends meet, Millerbernd suggests considering a loan that can be repaid in installments rather than all at once. Personal loans are usually a better option since they carry lower interest rates and the loans can be paid back in fixed installments over time.
“Buy now, pay later loans may be one way to afford some of those regular expenses without a credit check, just be sure you have a plan to pay it off on time," Millerbernd said.