Payday Loans Good or Bad?

Payday Loans

Are Payday Loans a Good Idea or a Bad Idea?

By: Pat Caymus

Are Payday Loans ever helpful, or are they always going to make your life far worse?

These days it seems like there are more and more companies offering payday loans. At first glance it seems like a helpful solution to a short-term problem that many people may face at one time or another. Yet is it as helpful as it seems? Is there more to the story than first meets the eye? We took a look at payday loans to see just how helpful or not they actually might be. The resulting information may surprise you.

Payday loans, rather than being helpful, might be the worst decision you could make. The fees and penalties and interest charges on these loans are so bad that a growing number of consumers are filing complaints with government agencies and consumer protection groups. Why is it such a problem for so many people? Take a look at the fine print in the agreements and you’ll see where these loans can cost you far more than they are worth.

High Fees: There are so many fees that some borrowers eventually pay more money in fees than the original amount of the loan. For example, someone borrows $300 but ends up paying $400 in fees alone, on top of the repayment of the $300. That is like paying 100% interest, just like a criminal loan shark would try to take from people. Beware of the many high fees that add up fast in this kind of loan.

Deceptive Advertising: Payday loans are advertised as being easy, convenient and helpful. In reality these ads can be very deceptive. Instead of being helpful these loans can get a person into a deep hole they may never be able to dig out of. Although the interest rates may be “legal” at this point in time, that does not make the business practices ethical. The Federal Trade Commission (FTC) regulates unfair trade practices and deceptive advertising. The FTC has been receiving a lot of complaints against payday loan companies and it would not be surprising to see them step in soon to protect consumers from this deceptive scheme.

Not Regulated: The industry is not well regulated but that is going to change, at least in California. Hopefully other states will follow suit. Recently Democrat Senator Don Perata of Oakland introduced Senate Bill 834. This bill was also sponsored by the AARP, Consumer Action and the Consumers Union among other parties. This bill is designed to help regulate payday lenders and to protect financially-strapped consumers from being pushed deeper into trouble. Payday loans can be the worst thing to happen to a family that is having financial problems. Those incredibly costly loans can make matters much, much worse and should be avoided if at all possible. Payday loans are a bad idea.

Pat Caymus writes articles that sometimes expose issues that can help consumers avoid problems. In a related article at Military Loans 101 he explains some quick, easy and much better loan alternatives to Military Payday Loans.

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