[--- Reading Time: 2 minutes ---]

Forty percent of adults don’t have enough money saved to cover a $400 emergency.  So, if things were to hit the fan (and they inevitably will), they’d have no choice but to borrow money.  While some people turn to friends and family for help, others prefer to take out a loan. However, not all loans are created equal. There are some that will have your wallet begging for mercy. Here are three of the worst ways to borrow money.

Payday loans

Payday loans have a bad reputation for a good reason.  Yes, you can get money quickly, but you’ll be charged a ridiculous amount of interest.  The average APR is about 400%.  Keep in mind that with a credit card you usually only pay 12-30%.  How payday loans work is you write a post-dated check for the amount you’re borrowing plus the fees and you’ll get paid on the spot.  Some places allow you to give them access to your bank account instead which is a terrible idea, don’t do it.  On your next payday, the lender can either cash the check you wrote, or you can roll the loan over to another pay period at an additional cost.  Unfortunately, only 14% of borrowers are able to repay their loans.  Most payday loans are rolled over or followed by another loan within 14 days…and that makes the amount of interest you have to pay grow.

Auto title loans

If you’re short on cash and own your car outright, getting an auto title loan may sound like a good idea.  With this short-term loan, you put your car up as collateral in exchange for money.  If you fail to repay the loan, the lender can seize your car. Unfortunately, this is how the story ends for one-in-five borrowers.  What makes title loans risky is the sky-high interest rates.  The APR for single payment loan is 300% and 259% if you pay in installments.  Only 12 percent of borrowers are able to repay their loan in one shot.

Credit card cash advances

One of the “perks” of owning a credit card is that many issuers allow you to get a cash advance.  Simply dip your credit card into an ATM, enter your PIN and you’ll get your money.  The process is easy, but cash advances are expensive.  The average APR is 24% and the interest starts accruing immediately.  You’ll also be required to pay a cash advance fee.  Depending on the card issuer, the fee may be a flat rate or a percentage of the advanced amount.