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Question: What are the bad things about payday loans?

(Posted by: Gary H on 2010-03-01 08:09:08)

I've never taken one. Please give me the bad things about them.

Posted by: Larkie on 2010-03-01, 08:17:35

Horrible interest rates. "Rollovers ", meaning they will roll over the loan balance for a finance fee and can do this multiple times before anything is applied towards the principle. You may have no way of contacting them to tell them you want to pay off the loan in full. As a result, you may find yourself paying back a loan over a period of months instead of weeks.

Posted by: sadguy on 2010-03-01, 08:11:09

I would imagine the interest rate is very high on them.

Posted by: Jake on 2010-03-01, 08:11:54

High interest rates and really really high late fees, for $200 u will have to pay back like $230-250, only use if u have to. Beside that they are helpful when ur in a tight spot.

Posted by: JJ on 2010-03-01, 08:13:43

It is crucial that you repay a payday loan as soon as possible. Many people get into trouble with these types of loans when they are unable to quickly repay the debt. If you can’t repay the loan at the end of the term, you’ll be charged expensive additional fees. It is very costly to be stuck in a payday loan cycle for a long time and can lead to larger financial problems. Payday loans are also much more expensive than other methods of borrowing money. In most cases the annual percentage rate (APR) on a payday loan averages about 400%, but the APR is often as high as 5,000%. A standard credit card has an APR of 12% and a standard loan APR is around 7%. If possible, it is better to use a credit card or tap into your savings in the event of an emergency.

Posted by: timothy p on 2010-03-01, 08:17:36

Not only the high rate but also the high fees. Some of these contract have an auto renewal for several months as well. You add the $30-$60 fee to the top of the interest for 6 months and you will likely pay back several times what your borrowed to start with. They are designed to put you in a vicious cycle of debt.

Posted by: rowlfe on 2010-03-01, 08:48:17

COST, pure and simple. The fee equates to a HUGE interest rate. Late fees are even worse. You could borrow $100 and if not careful, you could end up repaying $200. When I was in the Navy, I ran this same kind of thing, $20 today, $25 paid back on payday. Totally illegal of course. It was called a "slush fund ", and I routinely loaned out a bundle every pay period. I made a few extra easy dollars. I only got stiffed one time...

Posted by: Cami05 on 2010-03-02, 17:07:48

Payday loans a vicious cycle. I worked for payday loan company for 2 years. We always had the same customers it takes a really long time for people to get out of the cycle of using them. It seems like free money until you have to pay back the loan. The interest is very high on loans and you have to read your contract. My advice seriously look at your budget and see what you can cut out. If you are late on a bill call the company they may be able to make arrangements.