Break The PayDay Loan Death Cycle

Are you trapped in a payday loan death cycle, or have a friend or family member who is? See, the problem with a payday loan is that some people aren’t able to pay the first one off (if you don’t have money in the first place, you’re not going to be any better off two weeks later!), and then have to take out more and more loans to cover each loan they couldn’t pay off. Not only is there high interest, there’s fees. A former PayDay loan lender on personalbudgettraining.com shares his advice for breaking out of the debt trap.

If you can’t get out of this right now, start by advancing $50 less per pay period. Take the difference of what you were paying us in fees and start paying it into an emergency fund. Grab a job delivering pizzas, babysitting, whatever, and pay it into an emergency fund. Borrow less and less from us. Use the EF for actual emergencies. Once you are out of this, don’t get back into it.

Earn more, borrow less, and pay off more.

(Photo: ninjapoodles)

Comments

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  1. Chols says:

    People are better off taking a cash advance at 25% on a credit card.

  2. greensmurf says:

    Payday Advances, the legal way to steal your cash!!

  3. ChuckECheese says:

    This has probably been on here already, but here it is in case you haven’t seen it: The Predatory Lending Association website: [www.predatorylendingassociation.com]

  4. doctor_cos wants you to remain calm says:

    Maybe this is one instance where the govt should step in, as several states have done already, and enforce usury laws??
    Anyone??

  5. ottawa_guy says:

    @Chols: Yep… agreed, better taking a cas advance from a CC, less interest…since it’s APR and only a marginal fee (about 2.00 or so, depending on your financial institution)

  6. plustax says:

    @doctor_cos: I would think the fine folks at the Money Store have examined the laws of the land and feel pretty confident that they are technically NOT breaking the law. I don’t see it as enforcing current law but plugging up loopholes that allow them to get away with this behavior. Perhaps a gross reciepts tax on them for 95% or so?

  7. howie_in_az says:

    @Chols: I kinda figured the people using the payday loans were the sort of people that wouldn’t qualify for a credit card.

  8. cmdr.sass says:

    You get better interest rates from traditional loan sharks.

  9. pastabatman says:

    The people who are stuck with Payday, I would guess, are not let’s say the demographic for this site. yeah?

    But, gotta keep reminding the world that they are crap.

  10. AMetamorphosis says:

    Payday loans are synonymous with loan sharking …

  11. Techguy1138 says:

    The loans seem okay for what they are supposed to be. The problem is that people don’t use them that way.

    They are supposed to be for small amounts of money that you are just “short for” Like if you wrote out all of your bills, decided on a dinner out, then had an unexpected bill, like a flat tire or a doctors bill.

    Instead it seems that people are using them as free cash or to stave off a bankruptcy.

    I have been in situations where I’m looking at $200 on Friday and I need a $25 co-pay today.

    The problem is spending money they do not really have or actually expect to have. People used to just do this with check kiting.

    I can see the regulations that require a through education for the consumer as part of a solution.

  12. omyard says:

    I’ve used pay day loans a few times in the past. Everytime I did it I hated it, but it wasn’t because I overspent but because something unexpected usually came up.

    Now I’ve got a few credit cards I don’t max like a I use to and just use those instead.

  13. the_wiggle says:

    @ottawa_guy: marginal ha. read the agreement. 3% cash w/d fee on top of cash apr.

    look for balance transfer offers, hit up family, etc. before hitting up the legal loan sharks.

  14. DevPts says:

    To truly understand what these folks do, simply pay attention to their customer demographics. They [payday lender] claim to be nothing more than a source of emergency cash. I doubt this claim.

    How often do you see one of these shops in the more affluent neighborhoods ?

    They obviously pray on people whom are already in a bad way.

    If they were truly scrupulous lenders they would offer debt counseling as a prerequisite to loans which are greater than say 50.00$.

  15. jeremy marr says:

    I used to work at one of these stores back in the day. It didn’t last long – I figured out how bad it was pretty quickly.

    They prey on the uneducated who are in an emergency mostly. I’ve seen a lot of people who funded gambling habits with them too.

    Once folks get one, they are stuck. You’d literally have to go without an income for a week and a half to get out of the cycle. It is a sad situation.

  16. proper financial planning is very important if anyone wishes to remain away from these sort of financial payday loans. But even more important thing is that if you apply for such a loan rest assured that you can repay the full amount as soon as possible. If you have any sort of doubt it is better to be away from these sort of loans. Many people apply for a payday loan to repay an earlier loan. This is ridiculous as they should have thought before applying. There is no way out if you borrow from one to repay the other.