Hopefully, you’ve never had the misfortune to have need to call upon the services of a payday loan company, though, judging from the psoriatic spread of this type of business across the landscape of America, someone is making use of them. While it’s true that no one will wrench your arm up behind your back and march you into a payday loan company – the choice to employ the service is a decision of free will – society has normally taken a hard line against those “entrepreneurs” who make a living preying on the desperate.
Make no mistake, you would have to be either desperate or desperately stupid to ever cross their threshold, for the entire industry is nothing more than loansharking, plain and simple, and loansharking is illegal – except when it isn’t. All we can guess is that this industry has a mob of highly paid lobbyists, because interest rates on one of these short term loans can easily climb north of 100%. Let’s see a bank do that and try to stay in business.
Here’s how a payday loan works, and remember, this is one of the worst financial decisions you’ll ever make!
Your payday is still a week away but you’re short of cash and not about to stoop to the indignity of spending your last ten bucks on a loaf of bread, peanut butter, and gas to get to work and back for the next few days. Nope, you’ve got a drinking date with guys this weekend and need more cash, so you waltz down to your local payday loan company – don’t worry, you can’t miss them – and ask to set up a payday loan. Normally the amount runs the gamut from $50 to $1000 but it’s much harder to qualify for the higher amount. After being approved for a certain loan amount, you write a postdated check for the loan plus the fees. You walk out of the store with money in hand and they cash your check when the date on the check rolls around.
A payday loan is a way for people with no financial alternatives to stay afloat for a short period of time without asking for handouts but it is a very risky habit to develop, plus you pay a seriously high rate of interest. A typical $100 loan might run for eight days and cost you $18 in fees and interest, which works out to an 821% interest rate!
You would be better served to cut off your hand and eat it than patronize these vultures.
The Young Wealth Team
Flickr / Lip Kee