Payday Loans

Payday loans are so named because they become due on your next payday. That’s the way they work. You go to one of the places that offer them, ask for a loan, show them your last several paystubs as proof that you have a job, and then within about twenty minutes, you walk out with a small loan, due in full when you get your next paycheck.

The reason you should never take out one of these loans is because doing so will likely cause you to fall deeper behind in debt rather than catch up, as the come-on ads suggest.

Consider what happens for example if you get one of these loans because of some unexpected shortfall in cash. You walk into that store, show them your check stubs, write out a postdated check, and they hand you some cash. You then use that cash to pay for whatever shortfall you had. Then what? When you get your next paycheck, they cash the postdated check you gave them, and then you find out that you don’t have enough money to make it to the next payday, so, you head back to the payday loan place and ask for a two week extension, which they will likely give you.  But again, then what? Your next paycheck comes around and they deduct their share and you find yourself coming up short for the next pay period. And it never ends because the interest rate they charge at these places just goes up and up the longer you take to pay it back. And then if and when the time comes that you simply can’t go on with it anymore, they take your whole paycheck and then demand the rest, which you don’t have. So they put a little note in your credit reference and sell your debt to a collector that starts to harass you ever hour on the phone, or at work or wherever else they can find you.

This is why you should never take out a payday loan, because it will never solve your problems, no matter how tempting it may look.

Consider the reason you can get a payday loan, but not one from a regular bank. The regular bank is held back by usury laws that prevent them from charging you exorbitant interest rates. Thus, they likely won’t figure you are worth the risk if you are in such dire straits because they won’t be able to get enough out of you in interest charges before you default, so they refuse you.

Payday loan outfits aren’t held back by interest rate laws, because they are not officially banks. Thus, they do see a profit in charging you all that high interest before you default. They come out ahead, and that’s all that matters to them.

But you lose, that’s the other end of the deal.

And that is why you should never take out a payday loan, because you will lose in the end. It’s like taking that first hit of crystal meth; once you get on that train, there’s no getting off till the party is over and you are cooked and done.