In theory, payday loans should be a good thing. Short on cash? A quick loan until payday can come in handy. However, most payday loans have interest rates in the 300-500% range, and climb substantially higher if you defer your payment.
I mention this, as I spoke with someone today,who started a vicious cycle with one loan for a modest amount, and ended up filing bankruptcy when their multiple loans totaled over 6000 dollars for loans totaling less tha 1200. Now, not only are they up the creek financially, their credit is demolished, their bank account closed, and a long battle to financial stability.
In these hard economic times, and the season we’re in, it’s easy to look for a quick fix. However, with payday loans you’re likely to get yourself in a deeper hole, than what you were in the first place. In the years I’ve been in debt/budget counseling, almost 75% of people I’ve talked to, who found themselves in dire straits, had taken out one or more loans.
Many states have already legislated strict laws on these services, and here in AZ there was a law passed this past election to outright ban them.
There are many alternatives, but payday loans should never be one of them.