Payday Loans: When Do They Make Sense?
Friday, September 10th, 2010Over the summer a previous I had picked up a summer internship with the state doing technology work in a town about an hour away called Sioux Falls, which has a population of about 150,000. He was able to rent a bedroom from a couple he knew for only $200 a month, what a steal. One of the most interesting things that I saw on my way to work were the businesses on the way. There were three payday loan companies (especially those that provide No fax payday loans and Bad credit loans), one rent to own business, and a title loan company. Of course these companies were in the poorer part of town, wealthy people don’t make use of these services. Let’s face it, pay day lenders are everywhere, here’s how they work and why you should do anything you can to stay out of them.
Here’s how it works. Let’s say we both have a friend named John who is a bit down in his luck, he’s had an expensive car accident and had to pay $2000 to fix his car which wiped out his savings and paycheck, and now he needs some money to eat. John doesn’t want to starve, so he decides to borrow money, and sees all these commercials on television about a payday lender and how they will solve all of their cash problems. So John goes to the pay day lender, writes them a post-dated check for $450, and they give john $400 in cash and the payday loan company says they will cash his check 2 weeks later on his payday. John now has money to eat, and the payday loan company has made a nice profit. So What’s the problem?
So let’s say our friend John takes the money, buys food, gas and pays his utility bill, and then on his payday they take out the $450. What is John supposed to use to eat with until he gets paid again? Payday lenders merely delay the inevitable. John will have to turn to a payday lender again so he can get by until payday again. He will get stuck in an endless cycle of having to use payday lenders. Instead if John is living paycheck to paycheck, he should take a visit to the food pantry, ask for help from his friends or family, or just do anything to stay out of the payday lender.
Payday lenders are sub-prime lenders that provide Online loans who have have caused a great amount of controversy. Many have even compared them to loan sharks who target the young and the poor. If you do the math they usually charge anywhere from 400%-800% interest, which is actually illegal in some states. These payday lenders bill themselves as the answer to all of your financial problems and are charging exorbitant interest rates to those who can least afford them.
In the last several years Payday Lenders propped themselves up right outside military bases, and many servicemen fell into the trap, and had too high debt levels that they were deemed a security risk because they might take a bribe, and could not be sent overseas to fight for our country. Congress reacted and made it so companies could not charge servicemen more than 36% interest
Payday loan companies (and other sub-prime lenders) should be avoided at all cost. They are charging your huge sums of interest when you can least afford it, and are terrible financial products. Do whatever you can to avoid them

the upcoming years. While this may prevent students from exiting school with thousands of dollars in credit card debt, it does nothing to help them manage their finances today. Fortunately college students are not the only people using credit cards less; more people are using cash over credit these days proving it is possible to survive without our trusty plastic. If you are heading off to campus this fall, here are a few pointers to keep your finances in order without using credit.
circumstances. That is why a good, local insurance agent is much better than those who do not have offices in your area.