Thursday, May 11, 2006

Pay Day Advances

Today I was hit up by someone wanting to put an ad on my site. Normally, this would be a great thing because hey, if I can sell advertising space on this blog then I can pay off the debt even faster, right? But when I checked out the site I thought to myself that these people must be delusional or on crack to think that I would ever link to them on my site.

I'm not going to say who they are, but they were one of the many pay day advance companies that rip people off when they are probably already in a bad financial situation to begin with. Let's say you are behind on your bills and don't get paid for another week. You need cash NOW so you find one of these cash advance places that will give you the cash you need now. Nice of them huh? There's only one small catch: they will charge a teeny weeny amount of interest, in this case an APR of 391%. No, not 3.91%. Three hundred ninety one percent.

Holy moses! 391% APR? Are they out of their minds? Why not just ask them to give up their first born child?

At first when I looked at the site they said you can get up to $500 in your account tomorrow for only $15 per $100 borrowed*. "Not terrible" I think to myself, "but ahh, what is this * about?" I read down in the small print that finance charges are calculated every 14 days which is equivalent to a 391.07% APR. Very tricky bastards!

It makes me sick to think of paying that much interest. And think about it. If you are already hard up for cash before you get paid, when you do get paid you will have to pay back that loan and your next paycheck is already gone. Then what do you do? Take out another pay day loan? It would be like being in a never ending cycle of debt, digging a deeper and deeper hole that you will never be able to get out of.

So just don't do it! I know I am probably preaching to the choir here but people should avoid pay day loans like they are the plague. If you need cash, ask a friend. Do a balance transfer. Get another job. But whatever you do, don't get a pay day loan!

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Tricia said...

To think - about 4 years ago I applied for a job at one of those pay day advance places and I almost took the job! I decided against it at the last minute. They would have fired me anyways because I probably would have been making sure people saw the fine print and understood it.

I agree to try to get a loan from anywhere else than a payday advance place. You can get in a very viscious cycle with them.

Anonymous said...

I couldn't agree with you more. I never did one before, thankfully.

That is just awful what they charge.

Anonymous said...

I thought I'd go find out which of these "services" you were talking about. I Googled "391.07% APR". I figured an APR that specific would turn up a specific company. What shocked me was that it turned up several.

They get away with this, and avoid running afoul of the usury laws by a very simple expedient. That $15 per $100 borrowed is a loan-origination fee for a loan that is payable in 14 days. For a while at least, they will give the borrower a new loan for the $115 for a fee of $17.25 for two more weeks. I share your low regard for this dishonest tactic.

I see nothing ethically wrong with the concept of pay day loans. Although when your finances have reached the point where you are taking one, the interest and fees are likely to hasten the downward spiral. But this sort of tactic is just a way of moving extremely high interest into something that is not legally called interest.

Debt Hater said...

These companies are horrible. They prey on people, especially poor ones with bad credit. I talked to a woman who said she was in a bind and took out a loan to cover an unexpected car expense and before she knew it, she had taken out three mostly to cover the first one she couldn't quite repay. I can't believe stuff like that is even legal. It makes me mad.

Andrew said...

These Pay Day Loan places are going up like crazy in Southern California. Of course they are targeting the check cashing public who have no idea what they are getting involved with. I wonder who the owners of these businesses are and if they sleep soundly at night.

mypugsblog said...

I live in Canada and I used to work for a law firm that is starting a class action against these companies for the criminal voliation of charging people these rates.
I'm glad you posted this for others to see. said...

pay day advances can kiss my white little booty. go lpk! :)

Anonymous said...

I'm in this cycle and it is pissing me off to the point it is effecting my work.... Without work, there is no hope. I have MS and stress makes MS worsen. I make good money, just fell behind because I was out on a STD leave for 5 months, my son stole some money from me, my car broke down several times and somehow I was able to get through it and got myself back to work....