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Pay Day Loans

Pay Day Loans

If you read our article about pay day loan sharks, then you probably already know that we have a slightly unfavorable view on pay day loans.  It’s not that we believe pay day loan companies are out to get you, because they aren’t.  Pay day loan companies have every reason to keep you from going bankrupt, but that doesn’t mean they want you to do well financially.  After all, a customer who starts doing well is no longer a customer.

“Fee” Is A Way To Avoid That “Usury” Word

Pay day loan companies charge you a fee.  We believe that this is just a way to avoid that old, annoying “usury” word, because charging usurious interest rates is illegal.  In case you don’t know what usury is, here is how Merriam Webster defines it:

3 : an unconscionable or exorbitant rate or amount of interest; specifically : interest in excess of a legal rate charged to a borrower for the use of money
Merriam Webster

Charging a $10.00 fee on a $100.00 pay day loan that is due in a month is the same as charging 81.5% interest.  The problem is, most states make it illegal to lend money at rates higher than 25% (Cite), they call it “Usury,” so pay day loan companies call it a “fee.”  We get lots of people who complain about how hard we are on pay day loans, but we’ve noticed that many of these people are from pay day loan companies, so we take it in stride.

We Don’t Hate Pay Day Loan Companies!

We don’t hate pay day loan companies, but we do hate some of the tactics, and we will do our best to make sure that people use them as little as possible.  We believe that pay day loan companies should be upfront about their APRs, but in order for them to do that and be legal, they would need to charge normal interest rates which won’t happen.

It Is Called Risk/Reward Buddy!

The argument behind the fees is that they do it because they are lending money to a high risk demographic, and we completely understand that.  But if your APRs are usurious, then you should probably find a different business.  At their current rates, pay day loan companies prey upon desperate people who can’t do math.  If people are outraged over credit card rates, then they’d explode if they looked at pay day loan APRs!

How Do I Avoid Pay Day Loans?

A pay day loan is borrowing against your future labor.  You are telling the company: “I don’t have money now, but when I work in the future, you can have that money.”  Why would you want to give away your future money?  We know what you’re thinking: if we’re so smart and “high & mighty” then what is your answer to pay day loans?  Save your money.  Yes, you may have to live like a hermit for a while but it will get you to break the cycle! 

 Here are ways to cut spending and start saving:

  • Use less electricity.  Turn off the A/C and use a fan.
  • Eat less, or eat less expensively.
  • Don’t drink alcohol, switch to water and save money.
  • If you smoke, then quit.  We’ve heard the “easier said than done” excuse, but if other people in the world did it, so can you!
  • Use less gas, ride a bike to the grocery store, you’ll purchase less as well.
  • Use coupons on items that you normally purchase.  Don’t buy things you wouldn’t ordinarily.
  • Brew your own coffee, and don’t eat out.
  • Are your friends going out tonight?  Tell them you’re busy.
  • Don’t buy new items, buy second-hand when you have the chance.

Many of those things are sacrifices that don’t sound fun, but we’d much prefer to live by that list then under the thumb of a pay day loan company!

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