Never take out payday loans!!! - The Finance Forums

There seems to be a lot of people recommending payday loans to people. While I definitely understand the need for cash right away, payday loans are not the answer. They will only hurt you more in the long run.

Think of payday loans as getting a bag of money from the mafia. They will easily give you as much as you want, but the interest rate will be extremely high. Say 25-80%. This is an unregulated industry in most states and the companies can change any rate they want.

So if you need $1000 and there is a $25 fee attached, this gives you an interest rate of 2.5% right off the starting block. (Even higher is the loan amount is lower). Then you add the compounding interest rate of 25-35% for a total interest rate of 27.5%-37.5%. In addition, that $25 fee is added to the loan amount so you pay interest on that.

So what happens if you don't pay back the loan? You may not get broken knee caps, but your loan will be given to the debt collectors and they will surely make your life miserable.

If you really need $1000 for an EMERGENCY, not to go out to dinner and spend, then you should look around the house for something to sell. Surely there must be things of value laying around.

The other thing to think about is the bad cycle of payday loans. So you get $1000 this week and you get paid next week. In 7 days, this turns into $1030 by the end of the week. So you are already lost $30 from your next paycheck. That could be a half-tank of gas or groceries.
So, now you are short on money again, so you take out another payday loan for another $1000. There goes another $30 and now you are out a full tank of gas and food for the week.

Payday loans should be avoided at all costs. They are evil and designed to make your life worse, not better.

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