Why Payday Loans are Predatory

Payday loan places are everywhere nowadays.  The attraction is there for their services, as well.  I know because I have used them.  Everyone has come up short before payday and these places are claiming to help you “bridge the gap” between what needs to get paid and what you have in your account.  As the saying goes, nothing is free, and this is definitely an example of it.  Here is a bit of our story with these “services”.   

The scenario is fairly simple and unfortunately common for our family:  Our son had a trip to the hospital for a week and our life ground to a halt.  Extra trips up to the hospital, eating there, sitters for the other little one, missed work and just general chaos brought us into the “hole” again.  Rent came around and we were short, so we used one of these services.  I went in and after the requisite employment check, walked out with $700 and, after the fees, owing $785 on my payday.  We got the rent paid and such without any problem, then payday came. 

I ended up going onto a “payment plan” that basically allows you to pay the fee you originally paid for the loan and extends your payback period to 45 days.  I had to make payments each payday after that.  Here is the first nail in your coffin… the fee you pay for the “payment plan” (which is equal to your loan fee) doesn’t come off your balance.  So we still owed $785 for the loan even after we paid the $85 fee.  So it is a service that appears to help the customer but actually just gives you more rope to dangle from. 

Here is the reality of the situation:  If you don’t have the money and need to get a loan for it, you won’t have the money to pay it back.  Especially after they start tacking on all the extra “fees.”  It is better to try to ask for help from friends and family. 

We stuck to the payment plan, but what we discovered is that the payment plan they give you is pretty unforgiving.  They “lost” a payment I made and then pushed the balance through my checking account causing me to overdraft, yet again.  I know I should have kept the receipts for the payments made, and we paid the price for my lack of record-keeping. 

Our state (Washington) has laws about how these places can do business, but they still find ways to work around these laws and take advantage of the people they are purporting to help.  I am sure to some people, these might be useful services.  But after going through what we did, I don’t see it as being helpful.  Even with the “payment plans,” it feels like they can shaft you beyond just getting you for the additional fee.  Keep in mind, the average annual percentage rate for these run above the 300%  mark.  Would you take a credit card if it had that as its interest rate?  You’d be insane to do so!   Offer a family member the same amount you would pay as the initial fee as a “payback amount” and you will be better off. 

Even if you feel like you need these services, stay away from them.  They’re nothing but sharks.