Why Do People Fall For Payday Loans?

1. Skipweasel
   July 23rd, 2009 at 1:28 pm

   This is what Credit Unions are for - long may they last.

2. Splint Chesthair
   July 23rd, 2009 at 1:43 pm

   Just exactly how am I supposed to get my beer for this weekend if I don't get paid until next week? I can't trade chickens!

3. Earnest
   July 23rd, 2009 at 3:50 pm

   I responded to this in The Fray over at Slate. There are a large number of people for whom credit simply is unavailable. Those people use payday loans, and while payday loans have a high APR, the actual charge endured by most people is very small because they repay the loan within two weeks. If you want to get rid of payday loans, the easiest way to do that is to make more credit available to poorer people.

4. Skipweasel
   July 23rd, 2009 at 4:03 pm

   Earnest - that's exactly what Credit Unions are for!

5. Jameshoney
   July 23rd, 2009 at 4:09 pm

   I can't emphasize that last line of your post enough. This is many people's one and only option for credit, and the interest rates are raised so high because the purveyors know that people have no other option. I also second Skipweasel... and have to add that this is one of the major, and many, reasons it is so hard to escape from poverty in the US.

6. Frau
   July 23rd, 2009 at 5:01 pm

   OMG!! rant - When I worked as a hotel cashier, there was this one employee who would get payday loans every week. And it could only be approved by the general manager. She was so backed up into the payday loans, that when she was let go - ALL of her severance pay went to paying her payday loans.
   She did not have education past high school, I felt sorry for her, when I took over that job I sat and explained finance and loans and APR and how a percentage rate works..etc.. but she still kept asking for the loans.

   I think it was like an addiction for her.

   You have a tangible amount of cash right there and then in your hands, and so you are happy - until it runs out.
   And for her, just like Splint Chesthair said,
   she did go and buy beer.

7. vonskippy
   July 23rd, 2009 at 6:11 pm

   Why? Because they have no math skills, or self control, or common sense, or brains (pick three).

8. Christophe
   July 23rd, 2009 at 8:25 pm

   When I was working in retail, I was amazed by the number of people returning goods to get cash before payday. The amazing part is not the return in itself, but the regularity with which several customers would do that.

   Why did they always buy the stupid gadget if they couldn't afford it the first time?

9. Edward
   July 23rd, 2009 at 9:46 pm

   Easy credit is not the answer. People who use loan sharks (legal of not) will max out any credit they are given. I was married to a woman who thought her credit limit was her credit goal. She could arrange her life to pay off loans, but not figure out how to save to prevent needing them.

10. ted
    July 23rd, 2009 at 11:07 pm

    Some people go from payday loan to payday loan. It's called desperation. These business is no better than usury.

11. Carl
    July 24th, 2009 at 5:35 am

    Wait, we need more credit, more easily available? I don't like the sound of that. Why should we help people to spend beyond their means?

12. skidworth
    July 24th, 2009 at 6:26 am

    there is a big fracas over payday lending services here in SC.....so-called "predatory lending". I recall a time that if you wanted something, you would save up for it. don't feed me the bull sh!t about "the only means of loans, they have no credit". for some strange reason, the black community is upset over these businesses....they "target" poor blacks with their 400% interest and they only locate in predominantly black areas. last time I checked, "caveat emptor" still applies. be responsible, you are not entitled to a damn thing!

13. Alex
    July 24th, 2009 at 3:25 pm

    While it's frighteningly easy to fall on hard times in the United States (because of sickness, death in the family and other uncontrollable events in life), many of these people continually make poor choices that create/compound their problems.

    How many of them use payday loans to buy bread and butter - and how many of them buy cigarettes and beer?

14. WordyGrrl
    July 25th, 2009 at 3:09 am

    Alex, I'm thinking those payday loans go for beer and cigs. Besides, when a convenience store gets robbed, do the thugs clean them out of bread, lunchmeat and milk for the baby?

    My dream biz: a check cashing place that also sells lottery tickets, beer and cigs.

15. Payday Loans Stink
    July 26th, 2009 at 12:33 pm

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16. Futrell
    July 29th, 2009 at 7:34 pm

    To all you folks in a huff about payday loans and the companies that provide them, let's take a hypothetical situation and see which makes the most sense:

    I work retail at $9/hr and get paid every two weeks. I have a credit card with a limit of $500. After paying for rent, food, gas, insurance, etc. there's never much left of my paychecks. Say one day my car breaks down and, in order to get to work to keep my job, I've got to get it fixed immediately. The repair bill comes to $900 and, even if I max out my credit card, I'm still short $100 and don't get paid for a week; what do I do?

    Write a bad check - If I bounced a check to the repair shop, my bank would charge me $35 NSF fee. The repair shop would probably add another $25 to re-submit my check. Total cost=$60

    Overcharge my credit card - If I went over my credit card limit, Chase would charge me $39 (and probably raise my interest rate to the max.) Total cost=$39 (and a ding on my credit report)

    $100 payday loan - I live in Washington State, our laws allows a maximum fee of $15 to be charged per $100 borrowed for two weeks. Total cost=$15 (We've got a winner.)

    So, I get a payday loan for $100, get my car, and pay back $115 on payday. Done.

    All of this talk about high APRs is only because current laws require payday loan companies to describe them as annual percentage rates rather than as "fees" which would be more accurate. Banks and credit card companies are not subject to this requirement.

    Sure payday loan companies want your money, but anyone who thinks other for-profit companies are in business for anything other than making a buck are delusional. Payday loan providers are providing a service that people are willing to pay for. Some folks will abuse it, sure, but that's going to happen with anything. No business "really want(s) to help you".

    There seems to be a lot of misplaced anger aimed at "those people" in these comments. You should be angry at whoever's responsible for your 401k losing 80% of it's value in the last year. I doubt they're hanging around the corner store buying smokes and beer.

17. Chuck
    August 10th, 2009 at 11:06 am

    Hey, I came across this link a few days ago, it's not my website or product, I haven't even purchased the book myself. I personally have never had to take out a payday loan but, when I saw this I remember saying there will be a lot of people who would desperately need this info. Sorry if this may be inappropriate but it is right on target to helping people with their payday loans situation: http://www.paydaycrusher.com

18. alan
    November 17th, 2009 at 11:54 pm

    just because of no saving accounts and got an emergencies.

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