Editor’s Note: This is the first in a two-part series analyzing financial services like payday loans and rent-to-own plans. Today’s story examines the fees associated with these services, which financial counselors have described as “predatory.” Thursday’s story will examine alternatives to the services.

It’s another week until payday, and that last check is going to bounce.

But a commercial on the radio suggests a solution — a payday loan.

It sounds like a good deal at first — just sign up for the loan, agree to pay about $9 for every $50 borrowed and get up to $300 instantly.

But upon closer examination, it’s not such a good deal, said Mark Oleson, director of Iowa State’s financial counseling clinic. Payday loan and rent-to-own centers are “predatory lenders,” he said, who rely on the customers’ desperation and charge incredible interest rates.

“It’s predatory lending because it is taking advantage of ignorance,” Oleson said.

Oleson said that any credit card — even one with a 45 percent interest rate — is far better than the rates found with payday loans or rent-to-own centers.

Employees at rent-to-own businesses disagree that the practice is detrimental and said it may be beneficial to students.

The main advantage to rent-to-own services is that there is no long term obligation or credit check, both of which might be attractive to students, said Kevin Reif, store manager for Rent-A-Center, 222 Lincoln Way.

“If you only want it for one semester, just call us and we’ll come out and pick it up,” Reif said. “Delivery and service is included in the price.”

However, in the past, Oleson said, interest rates at this type of rent centers have been deceiving.

Oleson said some rent-to-own centers used to advertise “10 percent interest,” which referred to the weekly percentage rate, not the industry-standard annual percentage rate. The APR on that loan would be 520 percent.

On the other hand, APRs at local payday loan centers in Ames are clearly posted. For loans from $50 to $300, the rates range from 338 to 460 percent. Interest is higher for lower amounts borrowed. If the borrower’s check would not clear at the end of two weeks, the payday loan operator would charge an additional fee of $15. If the borrower could not pay the balance, a collection agency could be used.

Iowa does not allow rollovers, which let a customer repeatedly incur the finance charge to put off paying the balance. A customer can, however, pay off the balance and take out another loan. As long as the total amount borrowed is less than $500 per week, the borrower can have loans at several different locations.

After concerns that interest rates and hidden fees became too high in the industry, several states enacted regulation laws. Iowa is among 23 states that allow but limit payday loan rates.

Shannon Bohnsack, employee at Check Into Cash, 211 Main St., said, “It’s a good deal if you really need the money now, like for a car repair.”

Bohnsack said that some customers use the service only once while others use it every month.

Jodi Meredith, manager of National Cash of Iowa Inc., 1608 S. Duff Ave. Suite 2000, said some people use the service to survive and others use it to avoid bounced check fees.

“A lot of people think this business is for low-class people only, but I would trade incomes with lots of my customers,” Meredith said. “It comes down to money management.”

National Cash of Iowa only lends to people who have full-time jobs.

“It’s too easy for students to just skip town,” Meredith said. “It’s amazing how many people won’t pay if they don’t have to.”

Meredith said “good” customers can avoid the $15 late fee if they offer a good reason.

“We’ll waive the fee if we really know them,” she said. “Of course, if you have no history with us we have no choice.”