Don't Be Tempted By Payday Loans

Every week I notice a new "payday" lending outfit in my neighborhood. It seems their marketing strategy is to set up as many stores as they can in very visible areas. In this way, they are in your face and tempting you every day with their ‘easy terms”.

The proliferation of these loan sharks has me very worried. Getting a payday loan is the first step to perpetual debt. The easier it is to get a pay day loan the harder it will be for people to avoid debt. And debt is a crushing monster; not the American dream we are working for.

Not only are these payday lending stores at ever corner, they make it very, very easy to get a loan - No credit check required. But there is a catch. They charge outrageous interest. According to the Center for Responsible Lending, payday loans in some states have annual interest rates of up to 400%!

The loans are also structured in such a way that it is unlikely that you will be able to pay it back when it is due. If you can't pay the loan back, they make it very easy for you to roll the loan into a new one - for a fee of course. And if you do this a couple of times you can end up paying more in roll-over fees than the amount of the loan you borrowed. And you still have to repay the loan.

Seriously, I don't understand how these payday people are allowed to operate. I know we live in the US where capitalism reigns supreme but the payday loan business model is designed to make money from people who don't have money to repay the loans in the first place. They make easy profits because with such high interest rates, people will find it difficult to pay the loan and they will roll the loan over several times.

I know we are in a recession and many folks are out of work, but I assure you that a payday loan is not the answer to your problem. And in case you think you can take the loan and not repay it back, know that payday lenders are very, very aggressive in collecting the debts owed to them. So how can you avoid selling your soul to this devil?

The safest way is to build a savings account that you can tap into for emergencies. The only way to do this is to set aside your savings every month before you pay any bills or spend any money on yourself.

If you can't save money and pay your bills every month, you need to take some drastic measure such as:

1. Move to a smaller apartment or get a roommate.
2. Sell your car and buy a cheaper one preferably in cash so you won't have monthly payments.
3. Be honest with yourself and your friends. If you can't afford to go out to the latest trendy restaurant, suggest a cheaper place, or meet for dessert instead of dinner.
   

If your car breaks down and you don’t have money saved to get it fixed, don’t be tempted by a payday loan. Consider all other options first including:

1. Car pool with a friend or co-worker.
   
2. Use the money you had set aside for groceries and other activities to fix the car. Eat ramen noodles if you must. They are cheap and filling and don't have a 400% price tag.
   
3. Stop spending unless it is absolutely essential and necessary to get through to the next pay day.
   
4. Work out some payment terms with the mechanic.
   

A payday loan is like jumping out of the frying pan and into the fire. Do anything and everything possible to avoid one.