A Straight Talk on Debt

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Pay Day Loans: A Sucker Bet

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The story is often the same; you just needed some cash to cover you until your next pay day.” All you had to do was simply hand over a postdated check for the amount you wanted to borrow plus whatever interest and fees they required. The lender gave you the cash and you were on your way.  

There is no such thing as quick and easy money 

A few months later you have five or six payday loans and each of the lenders are taking money out of your checking account.  Your rent check bounces resulting in NSF fees. Sound familiar?  I have heard this story a countless number of times and I tell people, “If it’s too good to be true, it usually is.”  

The consequences 

Pay day loan lenders charge interest rates from 390% - 780%! Does that sound like a wise financial choice? It strikes me as legalized loan sharking. Unfortunately, most of the time the end result is a damaged credit history because the accounts wind up in collections and hundreds, if not thousands of dollars are wasted on exorbitant finance charges.  

What are your options?  

Since pay day loans are considered “secured” loans (the lender secures the loan with a personal item, your check), your options are limited.  

  • Pay the loan off.   Abide the terms and conditions of the loan as not to extend the length of the loan. This is not as easy as it sounds.  If necessary, you may consider a part time job or freelance work to pay the loan off. 
  • Let the loan go to collections.  Since they have your banking information you may need to close the account or continue putting stop payments on the checks until the loan goes to collections. Some of these lenders may be quite aggressive with their collection tactics and unfortunately, because they have your banking information, they have the most power. Once the account is in collections you can place it on a Debt Management Plan. 

The best advice is to avoid the quick fix of a payday loan; they generally lead to nothing but problems. It is like gambling in Las Vegas, the odds are already stacked against you. 



Rob Taylor  

Rob Taylor is a contributing author for A Straight Talk on Debt. Rob tells it like it is when it comes to the latest debt industry news and shares his advice on personal finance.


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  • Is this the same as a title loan?

  • Good morning thecutest,

    It depends. Sometimes the lender may ask for your car as collateral for the loan. Is that what you have?

  • During the summer I was unfortunately out of work along with being a newlywed so yeah it was a bad time. The sad part is my husband & I resorted to payday loans. What really sucks is one of the loans I took out was for $700.00 last June & I just paid it off. I paid over $1800.00 in intrest NOT PRINCIPAL. Their not bad if you can pay them off in 2 days and only pay like $15.00 in interest vs. a $35.00 late fee. I do not recommend them. They are trouble. I figured it up and my hubby and I are out over $1100.00 a month on pay day loans as a result of me being out of work for a whole summer. We want them paid off and not use them again.

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