Earlier today I saw an article about a man who took $2500 in Payday loans. The interest he paid? $50,000. And there are many people like him who get these "small" loans and pay interest but they don't realize that they are spending too much money paying interest and sliding more into debt because the moment you start getting them loans, you'll always be trying to get the loans. Though they are easy to get, payday loans are the easiest way to get yourself into debt. Don't get caught in the payday loan trap.
Payday loans never come cheap since those who advance them treat them as emergency loans and therefore, of higher utility. The only circumstance that can make a payday loan to look cheap is when a person is planning to invest the money somewhere or at least make it work for him. Many people are captured by the allure of payday loans resulting in pain since they don't read the fine print regarding the terms and conditions. A person should budget the extra cost of interest as an expense in this regard for financial prudence.
I agree that Payday loans are largely predatory and a trap. However I disagree with legal efforts to make this activity illegal. I used a Payday loans on one occasion where I needed to fix the car I used to get to work. Yes the interest rate was high but the paperwork was all very clear. I did try to go to my bank for the money but they flat out refused to help. So without the Payday loan (paid in full a few days later) I would have been out of a job. I think that so long as the terms of the agreement are very clear, people have the right to borrow money in any way they need to or even want to, even if some of them do make poor choices.
I have used payday loans in the past and they are so expensive in the long run. They prey upon people with bad credit who can't save money and can't get a traditional loan. I will never get one again. Now, I put little bits of money in savings each week and leave it alone. I find that I do not miss $5 and $10 each week and the money adds up over time. Payday loans are ok if you have a real emergency that you have to deal with, but you have to break the cycle and get caught up on your finances or you will pay dearly in the end.
The easiest way to break the cycle is to never start the cycle. That is, borrow only as much as you can repay on payday. That said if a person absolutely must have the money, and only these kind of places are willing to lend to them, what are they supposed to do? Conventional banks don't bother working out who is a good risk and won't do anything quick enough to help out in a real crisis. It came down to a Payday loan or selling my blood and the blood center was closed. (I had no long term credit record because I was a new immigrant).
