Search and You Shall Be in Debt: Payday Loans
I’ve been playing around with keyword searches and checking their popularity. Do you know ‘payday loans‘ is one of the most popular financial search keywords? Type it into Google and you get several million results and a gaggle of companies all clamoring for the top ad spot.
A payday loan is a small amount of money (well, up to $1,500) paid to you in advance until your payday. Once your loan request is approved, you send them a check and they wire the same amount straight into your bank account. Then when your payday arrives they cash the check you sent.
Sounds great, right? An easy, short-term cash advance. No wonder the demand for it is so high. But Bankrate.com says no, it’s not a short-term fix at all. It’s obviously popular with all the people who live from paycheck to paycheck and spend before they’ve earned, but spending pay before you’ve earned it leaves you short next time. And so on. It’s also expensive: you’re paying loan fees each time.
I also know from experience how the simple things are really the most expensive. My student loan 10 years ago was ordered via an automated voice over the phone. “Type in the amount you wish to receive. You can order up to $30,000… Thank you! That amount will be deposited into your account tomorrow.”
But I wanted to see more about how so-called payday loans worked, so I opened a random site from my Google search. Its ad had promised me: “$1,500 today. No credit check, no faxing.” Which is good because I haven’t owned a fax in about 50 years.
Inside, there were smiling faces and pictures of banknotes. “Cash wired to your bank account in one hour!” the page promised. The pictures of banknotes seemed to get bigger, but maybe it was just me. I clicked the button…
There was a simple form to fill in. I filled it in. But at the bottom came the catch: Are you a US citizen? No. So that was it. The easy money floated away.
Have you ordered a payday loan before? What happened?ÂÂ
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Thursday, May 31st, 2007 at 8:22 am
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Did you look at the interest rate? They are usually horrendous. Typically about 29% for a week or two.
May 31st, 2007 at 10:19 amGoodness only knows what that is over a year. I’d love a savings account that paid that rate.
29% is horrific. Even worse than credit cards. Reading those case studies (linked to) is so sad. All it seems to take is one loan and then you’re behind in repayments for months, if not years.
May 31st, 2007 at 10:28 amYes, payday loans are the worst sort of way to get money. They’re usually used by the people who can afford them least.
May 31st, 2007 at 11:20 amI have never used a payday loan, but they are very popular in California. There is one just down the street where I live. Basically they charge you a high interest fee to get your paycheck a little earlier (sometimes good in emergency cases). However, like Jay said, majority of the people who get them are by people who cannot afford them, so they just keep going in this circle of debt. I have even heard of some people getting almost addicted to the service because it seems so nice to get your payday early. It is a pretty sad trap, if I worked there, I would feel guilty everyday. There is my very large two cents on that, lol.
May 31st, 2007 at 9:41 pmWord to the wise, don’t fall into the horrible trap of PayDay loans. It got so bad for me at one point that I was taking out more PayDay loans just to pay off the interest on other PayDay loans. Such a legal scam.
May 31st, 2007 at 11:17 pmthanks for the article…I know now to stay away from PayDay loans
June 1st, 2007 at 7:35 amGreg..sorry to hear that
Hi Greg, thanks for posting. If you don’t mind me asking, how did you get yourself out of the cycle?
June 1st, 2007 at 7:36 amPayday loans are the scourge of poor communities. But, they offer something people need. Are there usury laws in all 50 states?
June 4th, 2007 at 4:51 pmI got mixed up in the payday loan mess, and what a mess it is, I am still trying to recover, it is unbelieveable, you end up taking out one to cover another eventually you are broke and there is no end in site.
July 13th, 2007 at 6:33 amcome visit me to read my saga at
http://thehub.yesdebtfree.org
please feel free to comment while you’re there.
Thousands of monthly searches but i recommend to stay away from it. Its just a short term fix.
September 29th, 2007 at 6:15 am