Getting a Payday Loan

[lorraineb]

I just found out that one of my acquaintances is quickly falling down the rabbit hole that comes along with getting payday loans, and then constantly redoing them to pay off the older loan. I just heard a fraction of what's going on, but it doesn't look like it's a pretty picture.

I have a hard time understanding why anyone would ever get a payday loan. Even when I was at my worst with the debt I had, the thought of getting a payday loan never crossed my mind.

I started to think about it and I'm trying to figure out if there ever is a truly legitimate reason that one should get a payday loan? Your thoughts?

[hamchan]

I used to get two or three a year before my bankruptcy. My credit was sh**, I had no savings, and I had a young child. I figured that paying too much for a $100 advance on my next paycheck was better than not having food, or not having bus money to get to work. Then my bank started offering a similar service for a little less money, so I used that instead. I never got into the cycle of getting one after the other. I am really glad that they were available to me since I didn't really have anybody to borrow from.

[dczech09]

The whole payday loan system is rigged to trap consumers.

John Smith has a $300 emergency, and has no cash, savings, or income to cover the expense. So he goes to a payday lender and borrows for a $25 fee (as an example).

Then payday comes around. John Smith is already strapped for cash (hence why he could not cash flow the emergency expense). John cannot afford to pay back the $300 loan, so he has to borrow on a new loan in order to pay off the former.

As much as I dislike credit cards, I will say that you are MUCH better off using a credit card than a payday loan! It is just so sad when people get trapped in a payday loan web.

[snafu]

I don't understand how these abusive businesses are allowed to function. I realize they loan to high risk borrowers but the rates are beyond belief when you combine fees interest for 30 days. Saddest is that these folks are the most vulnerable of the working poor. They don't earn enough to allow for any saving after paying rent, buying groceries and gas for the car. I wish the churches had some peer to peer lending system.

[Singuy]

I don't understand how these abusive businesses are allowed to function. I realize they loan to high risk borrowers but the rates are beyond belief when you combine fees interest for 30 days. Saddest is that these folks are the most vulnerable of the working poor. They don't earn enough to allow for any saving after paying rent, buying groceries and gas for the car. I wish the churches had some peer to peer lending system.

Well, high risk = high interest.

Look at it this way, if I loan my money to someone who I know without doubt can't pay it back, what interest rate would I loan this person at to make it worth it for me? Some may say "I wouldn't loan this person my money even if I charge him 100% in interest". Well, I guess some actuary did the math and that interest may be 150-300%. Might as well charge stupid fees and crazy interests because you know they will eventually file for bankruptcy.

[dczech09]

[QUOTE=Singuy;384054]Well, high risk = high interest.

Look at it this way, if I loan my money to someone who I know without doubt can't pay it back, what interest rate would I loan this person at to make it worth it for me? Some may say "I wouldn't loan this person my money even if I charge him 100% in interest". [QUOTE]

That is true. In the end, payday lenders are just responding to a market need/demand. And it is all high risk, so high return comes into play.

While the whole system is rigged to trap the consumer, it may not be fair to completely lay the blame on the lenders. Consumers need to better understand their options and how dangerous payday loans are.

A lot of people talk about regulation or even banning payday lenders (some states already ban them), but I really do not think that is the answer. If you ban it, similar activity will likely open on the black markets. So really, education is key.

[disneysteve]

I don't understand how these abusive businesses are allowed to function.

If I'm not mistaken, I believe the answer is CONGRESS. They changed the usury laws back in the early 90s if my memory is correct and that change allowed these predatory lenders to be born. This nonsense didn't exist before that because there were laws against it. So thank your government for this one.

[sarayu]

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[disneysteve]

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Thank you for your wonderful spam. Please explain to us how payday loans are such a good resource.

[dczech09]

many people scare about payday loans, but these loans are good resource for people who are in financial problems. Don't worry we provide the best online payday loans.

Nice English

They are a GREAT resource if anyone wants to live under constant fear of money. While they are created out of demand due to people's financial problems, the way that payday loans are structured is horrible for the consumer. The very people who use them are also the very same people who cannot afford them! There is a reason why rich people and middle-class people do not play the payday loan game.

I am certainly not in favor of making payday loans illegal. However, I will use my freedom of speech and the free-market to help get the message out that there are plenty of other alternatives to payday loans which make a heck of a lot more sense!

If you are going to place spam on here and say that payday loans are so great, please have something to back yourself up. Also please understand the purpose of the forum that you are placing this spam into.

[hamchan]

Rich people and the middle class don't use payday loans because they HAVE alternatives. Honestly, if you are very poor and have very bad credit, no credit cards, nothing of any value you can sell for a quick buck, and your family and friends are in just as bad of shape as you are, what alternatives are there? I'd like to see payday loans better regulated. I think they can be detrimental if abused, but they have honestly saved my ass more than once. I'd hate for there to be no options at all.

[AggieLife]

Anyone have experiences with pawn shops? perhaps this is the easiest way to get a smaller and cheaper loan? I don't have any experience with this though.

[disneysteve]

what alternatives are there?

What did everyone do before payday loans existed? They've only been around in their current form for about 20 years. Surely people had financial difficulties before that.

[hamchan]

Steve, it is not unusual in this country for people to go hungry, lose their homes, have utilities shut off. It was certainly worth paying a lot of interest in the short term for me to prevent those things from happening.

[bjl584]

Steve, it is not unusual in this country for people to go hungry, lose their homes, have utilities shut off. It was certainly worth paying a lot of interest in the short term for me to prevent those things from happening.

I can see your point. And if you take all emotion out of the payday lender industry they do serve a purpose. The interest is so high because the borrowers are so high risk. It's all probability and mathematics. It doesn't make it "right", but it is what it is.

But to Steve's point, what did people do before these places existed in their current form? I personally don't know, but they must have did something.