Why I Hate Payday Loans

Payday Loans Neon Sign

I hate payday loans and payday lenders.

The way a way a payday loan works is that you go into a payday lender and you sign a check for the amount you want to borrow, plus their fee.  They give you money that you don’t have to pay back until payday.  It’s generally a two-week loan.

Now, this two week loan comes with a fee, so if you want to borrow $100, they’ll charge you a $25 fee, plus a percent of the total loan, so for that $100 loan, you’ll have to pay back $128.28.

That’s only 28% of actual interest; that’s not terrible.  However, if you prorate that to figure the APR, which is what everyone means when they say “I’ve got a 7% interest rate”, it comes out to 737%.  That’s nuts.

They are a very bad financial plan.

Those loans may save you from an overdraft fee, but they’ll cost almost as much as an overdraft fee, and the way they are rigged–with high fees, due on payday–you’re more likely to need another one soon.  They are structured to keep you from ever getting out from under the payday loan cycle.

For those reasons, I consider payday loan companies to be slimy.  Look at any of their sites.   Almost none are upfront about the total cost of the loan.

So I don’t take their ads.  When an advertiser contacts me, my rate sheet says very clealy that I will not take payday loan ads.  The reason for that is–in my mind–when I accept an advertiser, I am–in some form–endorsing that company, or at least, I am agreeing that they are a legitimate business and I am helping them conduct that business.

In all of the time I’ve been taking ads, I’ve made exactly one exception to that rule.   On the front page of that advertiser’s website, they had the prorated APR in bright, bold red letters.    It was still a really bad deal, but with that level of disclosure, I felt comfortable that nobody would click through and sign up without knowing what they were getting into.    That was a payday lender with integrity, as oxymoronic as that sounds.

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  • 10 comments

    Comments

    1. I am with you on this, I think it is a high price for a loan.

    2. I too hate payday loans and I know many people that would be sucked in by them and end up losing their shirt.

      There is no such thing as something for nothing, and the Payday Loans are looking for a whole lot of something, from you the borrower. (not you, Jason, you the borrower)

    3. Being from metro Detroit I can find one of these places around every corner! Now I see a ton of them online. Though I have to admit I have accepted advertising from them in the past…I like your integrity!

    4. While I can appreciate your decision I don’t particularly agree with your stance on the product or the advertising thereof.

      As far as the product it has a use for a select consumer. I don’t smoke weed or cigs but I absolutely think it is okay for people to make that decision for themselves.

      Advertising – Depending on where it is located it is just in the background there for SEO purposes…who really clicks them?

      • I can’t bring myself to support or encourage their business model.

        If you’re good with it, that’s fine, too. I drew my line where I was comfortable. I don’t pretend to make that decision for anyone else.

    5. They sound like a bunch of loan sharks to me. I wouldn’t trust them either. A high price to pay for a loan. No thanks.

    6. As a new blogger (2 days) I am surprised how many payday loan advertisements I have seen. I like your integrity and think I will follow you on this.

    7. I agree, which is part of the reason I wrote this article http://sholland10.hubpages.com/_9g6g4fj4tqvu/hub/Who-is-to-blame-for-Americas-financial-downfall

      These people lure you in and then you are left out to dry.

      Good Article!

    8. There are some people who understand the loan and still want to take it out. They may be few and far between but they’re out there. I like some companies better than others but I accept all types of advertising, as long as I don’t have to give an opinion.

    9. donald jackson says:

      I own payday loan because they wont work with you and the the fees are to high so I stop going to them pay day loan ones a month.

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