Why Payday Loans are Dangerous

Saying that payday loans are dangerous is an understatement. The bottom line is payday loans are a vicious circle of indebtedness. The companies prey on those who can least afford the fees, and many customers are encouraged to perpetuate their debts by rolling over the loans. There is no accountability in terms of preventing customers from digging deeper holes for themselves. Unlike financial institutes that limit borrowers, payday loan customers are on a continual merry-go-round. The reality is that many people do not stop at using the service once and then walking away. It becomes a way of making ends meet. But things never even out, they just get worse, and for the majority of payday loan users, the service is a major disadvantage and disruption to their daily lives.

Let's examine Eight Reasons why payday loans are dangerous:

1. No-one, even the wealthy, can afford the interest rates. Often, the rates are not disclosed until the customer actually decides to take the loan. In fact, many websites for payday loans do not include the interest rates in their FAQ section.

2. Not all alternative financial solutions companies allow customers to roll over their loans. Also, not all states and provinces allow the practice. But, for customers who happen to live where this is possible, many are quickly and easily enticed into extending the loan periods. This is not a good scenario for anyone, as the fees mount astronomically, and the debt never gets repaid.

3. Payday loans are an addiction. Once users see how easy they can source extra money, they believe that they have found a solution to their problems. Stores that offer payday loans often promote the services as "temporary band aids" or "emergency funds". The whole advertising effort makes the service sound like it is an answer from heaven, which only creates a false sense of security for customers. They keep going back when they can ill-afford the fees.

4. If customers are so desperate that they need to apply for payday loans, then they are already in enough trouble. In other words, if they cannot afford to pay their existing debts, there is no sense in adding more to the pile.

5. Your personal financial situation may be disclosed to others if you do not pay on time. Imagine your employer getting a call about your delinquent loan? How embarrassing would that be?

6. Obtaining payday loans does damage credit scores. Even if you are having problems with your debt load, you may still be holding your own, just barely. By succumbing to the temptation of taking an advance on your paycheck, you run the risk of damaging what credit you have.

7. Most people do not ask questions until they get into trouble. Once they realize they are paying over and over on the same initial loan, they start to wonder if the service is even legal. Obviously, it would have been smarter to investigate before applying for the loan. This is one area where the internet has enabled illegal operators to work in states that ban these type of services. For example, West Virginia, Georgia and Maryland have not permitted the practice of providing payday loans because they view them as predatory lending. But cerrtain companies that offer them online, have not declined customers that live in those states. Basically, people are involving themselves with illegal activities. While the state's Attorney General will side with consumers who were duped, future lenders may not look upon this information in a favorable light.

8. Quite frequently borrowers become so distraught by their situations of having to pay back the payday loans store over and over, that they close all their bank accounts in the hopes that the loan providers will eventually go away. They also assume that they will experience relief by not having all the insufficient funds charges on their bank accounts, as a result of not paying out the post-dated checks or pre-authorized debit charges. Ignoring these people does not help the situation. It does make it worse, since most times, the company will serve the customer with papers taking them to court. This is not a situation in which anyone wants to find herself.

We believe that payday loans only help the owners of these stores. Because more customers than not find themselves in deep water, we maintain that payday loans are dangerous.