Do Payday Advances really make sense?

[rizzmo]

I have an Aunt who managed a payday loan store for a few years. She worked for a credit card company that fired her for theft so they would not have to pay her pension when she retired. Long story short she sued them and won, but it took years. She was forced to move to a very rual area where the only employment she could find that paid enough and made use of her skill set was managing a payday loan store.

These places make money hand over fist, it is insane. She was taught tactics on how to get people to "re up" their loans. I would take a long time to explain so I'll skip the long detail, but basically it resets the persons loan so the ammoritization schedule starts all over agian. The loans store share list of clients with each other because their is so much profit they don't need competetive advantage. People also borrow from one payday loan store to pay off the other. This is truely predatory lending with interest rates up to 800%.

Even though she had worked in the credit card industry she was sickened by the way these places are able to legally rob people. She found another job in a non for profit that has nothing to do with lending and couldn't be happier.

[Joan.of.the.Arch]

OK, perhaps our legislators could focus more on educating the poor and uninformed vs. passing stupid bills that these companies will easily find ways to circumvent. They are no worse than cc companies or Goldman-Sachs for that matter.

Our politicos only care about being re-elected for the most part. I lay the blame squarely on the consumer of these loans but The "help" I've seen offered has come in the form useless bills passed that any lawyer with an online degree could get by. The answer to P.D. loans is that they aren't the answer. Educate the people but stop passing useless legislation that benefits nobody.

Actually I think it required legislation in each state to make these places legal about 20 (25?) years ago. "Usury" laws go back many years in this country. I think usury laws were repealed and new law written that makes the previously impermissable loans permissable. The passage of new legislation meant to accommodate credit card companies by allowing them, in certain states, to charge previously disallowed high levels of interest is probably what started us down the road to make even higher levels of interest legal. Of course, there were always loan sharks, but their business was illegal and prosecutable. Now we've legalized extremely highest interest loans.

I'm old enough to remember inner cities and the skirts of military bases without these payday loan businesses. If payday loan businesses have always existed in the landscape of your life, it might be hard to imagine that exorbitantly high interest rates were once just understood in our "bones" to be wrong, similar to how we understand in our bones that it is wrong to kill the innocent. It was just part of the ethic of our society with roots going back centuries. Guess I can't explain it.

Surely anyone who would take such a loan is either stupid, desperate, or both. It sure feels wrong to me to make a business to squeeze money out of the stupid and desperate, only to make them more desperate...and then squeeze 'em again...and again.

[disneysteve]

Surely anyone who would take such a loan is either stupid, desperate, or both. It sure feels wrong to me to make a business to squeeze money out of the stupid and desperate, only to make them more desperate...and then squeeze 'em again...and again.

I loathe payday lenders but just as a semantic comment, I think there is a fundamental difference between "stupid" and "uneducated". To me, uneducated is someone who doesn't know any better. Stupid is someone who knows better and does it anyway. I think most of the folks who take these loans fall into the uneducated category. They really don't understand what it is they are doing and aren't aware of their other better options.

[GREENBACK]

I loathe payday lenders but just as a semantic comment, I think there is a fundamental difference between "stupid" and "uneducated". To me, uneducated is someone who doesn't know any better. Stupid is someone who knows better and does it anyway. I think most of the folks who take these loans fall into the uneducated category. They really don't understand what it is they are doing and aren't aware of their other better options.

I do agree with the "uneducated" part but it's also a bit of stupidity or maybe complacency on the consumers part. There are plenty of sources of information available about making wise financial decisions but many folks ignore it out of laziness or because they don't think about what they're doing.

I liken it to people who don't watch the evening news and are clueless about what's is going on in the world or community around them. You can't educate those who have no interest in being educated. The P.D. loaners may be predators but the world is full of predators and it's up to the individual to avoid a "snake" when they see one.

[disneysteve]

The P.D. loaners may be predators but the world is full of predators and it's up to the individual to avoid a "snake" when they see one.

I agree 100%. I say that every time I hear about some scam that is so obviously a scam I can't believe anyone falls for it. If people are going to behave stupidly, they deserve what they get. You can't get all upset because someone broke into your car, for example, when you left your wallet, GPS and other items sitting on the seat in plain sight. What did you expect would happen?

[rizzmo]

Actually I think it required legislation in each state to make these places legal about 20 (25?) years ago. "Usury" laws go back many years in this country. I think usury laws were repealed and new law written that makes the previously impermissable loans permissable. The passage of new legislation meant to accommodate credit card companies by allowing them, in certain states, to charge previously disallowed high levels of interest is probably what started us down the road to make even higher levels of interest legal. Of course, there were always loan sharks, but their business was illegal and prosecutable. Now we've legalized extremely highest interest loans.

They get around Usury laws by charging "Fee's" for borrowing the money. Fee's are mostly unregulated. Credit card companies don't have to obey Usury laws because they don't apply to federal lending instituions.

[BlackDiamond]

why do you consider this being shady? There are many people who use a cash only basis. Granted some are people who have screwed up their check writing abilities. As a matter of fact you even said he took out the loan and paid it right back. So, he pays back what he borrows and quickly. that sounds responsible to me. Perhaps not responsible to take it in the first place but things happen. I have never used a payday loan and hope I never will. But I am one of those people that believe that I am not able to see what others are going through and be aware that unforeseen situations can and do happen. Now, while I will agree that taking the loan for a big game (if that is what it was) was crazy in my opinion there are some people that would be the exact opposite. but then again, the only game I watch is baseball. football is yucky well to me anyways.

lol he was just an all around shady individual. I suspected the lack of paper trail was because he may have been trying to avoid child support. I never did find out but I wound up dumping him after one of his exes put a restraining order on him. Luckily, I fled before there was any serious involvement. haha. I laugh about it now.

And it was a soccer game, not a football game. Not that it matters. But since we're mentioning it.

[nmboone]

Around 15 years ago or so, my parents got so badly caught up in these people's schemes it's ridiculous. I'm not saying it wasn't my parents fault because they're the ones who went and got the loans. But those places are literally the devil. I remember being young and riding around with my parents from loan place to loan place trying to catch up with all of them. They literally took loans from every payday place in town. My parents ended up bankrupt.

Experiences like that are probably why I've wanted to learn about money as an adult so I can avoid things like that.

[maat55]

I've considered opening a payday loan a few weeks before 12/21/2012. I'll take houses as collateral.

[heidrek]

Paypday loans are often misused by people. Getting a payday loan should really be a last resort, but for many people it's s common option. the interest rates on those things are pretty punitive.

[neguy11]

I used payday loans for about 6 months. Yeah the fees are high, but it prevented me from paying bills late. I didn't get caught in the "trap" because I knew I had a yearly bonus coming and used it to pay off the last loan. I think they are fine for occasional use IF you understand what you are doing and don't take out more $$$ then you need.

[maat55]

I used payday loans for about 6 months. Yeah the fees are high, but it prevented me from paying bills late. I didn't get caught in the "trap" because I knew I had a yearly bonus coming and used it to pay off the last loan. I think they are fine for occasional use IF you understand what you are doing and don't take out more $$$ then you need.

I personally look at them as an "I failed to prepare properly for an emergency", wake up call. Payday loans, credit card balances and bumming off family and friends are all symptoms of irresponsible planning. A lot of people do this out of ignorance and training from others.

It is easier and funner to just spend and consume, than save and plan out future expenses. The sad part is when people have learned there are emergencies in life and still just live payday to payday.

[Slandgie]

We got snookered into a payday loan many years ago. Funny thing is, it was when I made more money at a previous job. Since then, I have found ways to cut back on spending and have no need for those snakes....

[wysiwyg4]

There are many other options as you have stated that you can look into.

Charging with credit card is one good option. It gives you at least
3 weeks time to come up with money.

Interest on certain cards and some folks are quite exuberant but not in
the stratosphere like in the case of payday.

Any option you have stated is better than payday.

[Stuartthomas]

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.