Do Payday Advances really make sense?

[Eric80]

payday loan should be the last place you go. keep it in your mind, NO free lunch, payday loan takes advantage of you (bad finacial situation), and usually charges very high interest.

If it becomes a part of your life, then you need do something to change.

[Debt Relief]

I have 2 friends that worked in a payday advance place and told stories about customers who came in every month so that they could finish the month. I know that many people do not do this, but use it as a one time solution. I have seen in various places on this board where people have posted in favor of payday advances.

My question is when weighed against other options, what options are riskier than payday loans? At around 300% APY, what is a worse thing to do? I understand when you have no other options, but what if you have options?

Some options include:
401k loans
Personal Bank Loans
Personal family/friend loans
Charging on a Credit Card
Paying the bills late

I am curious as to the pros and cons.

3 words... Legalized Loan Sharking! Payday loans generally help those with money problems do one thing... dig their hole even deeper.

[Stuartthomas]

Payday loans are good, but many people still don’t understand how they work or just listen to what they hear from friends and think that is how it is done. If a person hears of a bad experience, they think that all payday loans have the same experience, but often each individual has their own circumstances and what doesn’t work out for one person may be just what another person needs.

[disneysteve]

obviously ...If you take a short term loan and turn it into a 390% APR then of course it sounds horrible. But its not an annual loan, its a short term loan.Short term is different than long term.

No, it isn't different at all. If the APR is 390%, it is 390% whether you borrow for 1 day, 14 days or 365 days. The actual amount of interest paid will increase as the term increases due to compounding, but the interest rate is fixed.

Payday loans are good

When will you stop posting this nonsense. Nobody here is falling for it.

[cicy33]

No, it isn't different at all. If the APR is 390%, it is 390% whether you borrow for 1 day, 14 days or 365 days. The actual amount of interest paid will increase as the term increases due to compounding, but the interest rate is fixed.


When will you stop posting this nonsense. Nobody here is falling for it.

While I will not say that payday loans are good. They are not the evil everyone makes them out to be. They are there because people use them. Yes, their interest rate is obnoxious, but it is clearly spelled out. I personally used one a few years ago. I was made fully aware of how much I had to pay and by when. I was in a tight spot and really needed a small amount of money for a short time. as others have learned and as I have there are other ways to learn to avoid these things. But the bottom line is that people have to take the responsibility for themselves and accept that THEY are the ones that took the loan. If they don't pay it back, not my judgment call. But you cannot blame the companies solely. They would not exist if there weren't people looking for a quick fix to everything. These loans were actually meant for an emergency situation. another thing to think about. many people that use these have poor credit and have little other options. If anyone of you out there on these boards was going to loan money to someone with poor credit, you would either say NO WAY! or you would also charge high interest rate to be sure you got paid back and to make up for the ones that don't pay. If one runs into a serious situation and need money desperately for a brief time and are aware of the pay back these can be useful. anything can be bad. how it is used is what determines the outcome. I mean one can say that a car loan is evil! afterall, people with poor credit pay approximately 20% - 30% interest and if they get it repossessed then they still have to pay it after it is sold for a ridiculously low amount at an auction. so if one gets a loan and then doesn't pay it back and the interest compounds, well, they must be evil too. No, it's not, it is the customer responsibility to pay.

[ferriwinkle]

Payday loans should be a last resort, and i mean very last. The interest rates are ridiculous. One of my former coworkers used to get title loans (similar to payday loans, but they hold your car's title as collateral). he would pay just the interest every two weeks in order to not have his car repo'd. on a 4150 loan, he paid $25 every two weeks for about 4 months until he could pay it off. So he paid about $200 in interest for 4 months on $150 loan---ridiculous.

[Snodog]

While I will not say that payday loans are good. They are not the evil everyone makes them out to be.

I will agree that if you have to use a payday loan a few times during your life its not a big deal. But when people get into the habit of using them it becomes a cancer to your finances. If you have to use a payday loan it is a sign that you are not managing your money as well as you should be and changes need to be made.

I think payday loans are better than the alternative of going back to loan sharking but they should be more tightly regulated. No one should be allowed to charge 800% interest!

obviously ...If you take a short term loan and turn it into a 390% APR then of course it sounds horrible. But its not an annual loan, its a short term loan.Short term is different than long term.

I agree that I'de sooner have a 10 day loan at 390% than a 10 year loan at 390% but for many of these people it becomes a way of life so it has the same effect as a long-term loan.

Why do you keep bumping up old threads and giving bad advice?

[disneysteve]

Why do you keep bumping up old threads and giving bad advice?

He works for a payday lender. He originally had a link to the company in his sig but it was removed by the webmaster. He continues to pull up every thread that ever mentioned payday loans, however, and point out how wonderful they can be and what a great service they are to help the poor.

[maat55]

Oh I would never get one. That is the point of my Emergency Savings. I was just wondering after seeing several places where people proposed them as a solution if they were even appropriate then. I personally feel that there is nothing worse than a payday loan. I was wondering if anyone could propose a situation where there wasn't a better alternative.

Unfortunately, many people look at loans as their only option. Cutting their budget sharply and working an extra job to get ahead quickly is considered an unrealistic option.

Until someone has had that "I've had enough of living broke" moment, they will always avoid the hard but most rewarding option.