100% interest? Makes taking your chances with Vito seem appealing, doesn’t it?

Payday loans are, indeed, hard to pay back, but the interest is not as bad as you indicate unless you roll over the loan. I live in Oregon where the Legislature has just reinstated the usury laws they repealed in 1984. The end result is that all the Payday Loan businesses have quit. The law now allows them 30 points above prime, but that isn’t enough for the greedy bastards.They just closed their doors and ran.

I remember when I was in the service there was always some guy in the barracks who would lend money “six for five.” This was essentially the same interest (20%), and had the same due date. He would stand at the door to the pay office with his hand out - and, sometimes, his “enforcer” at his side.

On the other hand, a short term loan can be helpful when things all come at you at once. One has to be responsible and realize that it is NOT free money. If you can budget the repayment, the loan can save a lot of heartache. Banks will not lend small amounts any more. Mine has a $10,000 minimum, and wants a pound of flesh as collateral.

Like anything else, Payday loans are a tool which, if used judiciously, can bail a guy out and smooth over a rough patch.

I thought that Congress was going to investigate these people to see if they need over sight?

Re: Bob, “Payday loans are, indeed, hard to pay back, but the interest is not as bad as you indicate unless you roll over the loan. I live in Oregon …”

Maybe it’s because you live in Oregon. Here in Michigan (yuck, I hate this state) there are some loans which ARE as high as 500%. It is, quite frankly, nothing short of disgusting.

And come on, I have terrible credit, and even I can get a car loan with a rate well below 20%.

Even though, in an emergency, a payday loan can help someone out, I still think you should consider other options. I’d pawn my possessions before I’d get a payday loan.

Prevention can be the best medecine…a stitch in time can save nine and all that.

Why not make some sacrifices right ~now~ and save up a little money for that rainy day? When bad times come, and they will, then you’ll have emergency money in a savings account to tide you over the tough times.

I advise you to drop the cable, the cell phone, the internet connection, eating out and *everything* but the essentials until you’ve got 2-3 months of of after-tax salary saved up: at least $10,000 and ~more~, if you can.

Mind you, there may be penalties to dropping services like the cell phone if you’re on a contract that may prevent you from following this advice exactly, or you may need the cell phone if you’re looking for a new job, etc… but otherwise you must be prepared to sacrifice. Carefully plan out what you are going to spend and cut down to food, shelter and clothing until you have money saved up for the hard times to come.

A penny saved is a penny earned, they say. Wouldn’t you like to pocket the 500% interest you’d otherwise pay?

If you are already desperate, you might consider moving in with your parents or humbling yourself and asking friends/family for help. A brother is made for adversity! Be prepared for real sacrifice in return! If you can read this, you’ve got a computer: use it to make resumes or find other ways to turn it into work & earnings. Otherwise, you’re wasting your time wallowing in self-pity and browsing the internet: sell your computer and use that as a payment toward your debt. Start mowing lawns after work, offer a car wash, sell cookies, whatever. Yes, you’re gonna be dog tired, overwhelmed and discouraged: get to work.

Negotiate with the credit card company or the loan shark for reduced interest. Generally speaking, though, it does NOT pay off to ~extend~ the period of the loan in return for reduced payments.

The government, though well intentioned and truly intended for our common security, doesn’t make a very good parent. You are responsible for your own safety and financial security, don’t wait for help to arrive - the hard truth is that so few care. In fact, many people make money preying off the weakest!

If you cannot help yourself, how on earth are you going to be ready to help others?

Folks these scum bags are in biz-niss because they CAN charge 10-15% per loan per pay check advance and not fall under the Usury laws. The usury laws are only for those institutions that fall under the definitions of a banking facility. The per annum interest rates will work out to be anywhere from 120% to 500 % but when done in monthly increments they seem small and inconsequential, which of course is not true.

They prey on the ignorant masses of which I was one of them. Well I have not used one of these services in over 32 years but was ignorant of the APR that the poor average sap pays out.

Only way these scum can go out of business is to educate the public and teach them that instant gratification has a very steep price to pay……after that …well….we’ve done our part…..eh……lol….

I’m not sure where you got the information for this posting, but you’ve got a few things provably wrong.

The idea that “with a payday loan you will generally end up paying back over twice the value of the loan. For a $250 loan you can expect to pay back over $500″ is absolutely not true. The typical fee on a payday loan is $16 per $100. These are two week loans. You borrow $100, you pay back $116. Period. The APR calculation is misleading because in order to calculate it you have to take the two week loan and extrapolate it to a full year.

Most states cap both the fees and the amount of loan you can take. On average, the fee is $16 per $100 and the average loan amount is $300.

As someone who has bounced a few checks or paid a few credit card bills late, I completly understand why these loans are so popular.

Judging from the comments posted above, I’d guess that nobody on this list has ever had to use a payday loan or have any idea how the product works.

A UK payday loan company has recently started advertising on TV and when you visit their site you find a typical APR of 2339.30%!!

It’s outrageous! The cost of borrowing £250 for 30 days is £75. That’s 30% of the original loan value in just 30 days! If you borrowed the same amount from a friend and they tried to charge you a similar amount you would laugh!

Lynz I’m not sure where you get your payday loans, but there are more than a few outfits that have payments which last 20+ pay periods. Hell, do a search on google for a “payday loan” and check out the advertisers sometime and their rates some time.

In the short run, the interest doesn’t matter; consider it a fee for somebody helping you. If I were stupid and ran out of gas out on the Interstate somewhere, I’d gladly pay $10 a gallon–and I’d consider it a bargain! But I’d only buy one gallon.

In the long run, however, it would be economic slavery to let some bloodsucker hook his IV up to your arm and drain you. Protect yourself by saving ahead, as Michael B. Johnson noted above. It is a time-proven fact that you can pay yourself first, each and every payday, and the remaining money will stretch far enough that you won’t miss the part you put in savings. Try it; it’s one of the most empowering changes you can make in life. See http://www.choosetosave.org/tips/

If a loan is longer than two-three weeks, it’s not a payay loan. A loan that has 20+ payments is an installment loan and is a completely different product. Most states limit the term on payday loans. In Missouri, for example, state laws regulating payday loans set the minimum term at 14 days and the maximum term at 31 days. And I’ve read about many lenders that offer an extended payment plan at no additional charge if the loan cannot be paid back when due.

Agree with you about the google search…it’s scary to think that many of the internet lenders aren’t even located in the US and follow absolutely no guidelines. The first one I pulled up was out of costa rica.

Is anyone aware of any studies done on places like Oregon, where payday lenders have shut their doors, on where people go for short-term credit since the payday lenders were forced to close? I wonder if Oregon has a higher percentage of people who now take out loans online.

LordKat-

Your post made me curious so I actually just looked up the Michigan law that regulates payday loans.

Here are the current regulations in Michigan:

Maximum fee allowed: 15% on first $100; 14% on second $100; 13% on third $100; 12% on fourth $100; 11% on fifth and sixth $100.

Loan rollovers allowed (where you pay the fee to extend the loan another two weeks): NONE allowed

Maximum amount: $600

Maximum term: 31 days

Additional regulations: Right to rescind and no criminal prosecution

So, on a $100 payday loan, the maximum fee allowed by law is $15. The only way you could reach the triple-digit APR is if you took out one loan and paid the $15 fee every two weeks for an entire year. Which is impossible because rollovers are not allowed by law.

For a one time or rare short term use, payday loans can be a good choice. Just pay them back and don’t keep taking out loans. Be responsible.