Comments on: Payday Lenders – Are They Really The Ones To Blame?

By: Hugo Shelley

Hugo Shelley — Mon, 29 Dec 2014 13:22:36 +0000

Loans, for me, are like any other risk we take in life. Unpredictable despite being calculable, but it can bare great things as well.

By: Derek Chamberlain

Derek Chamberlain — Tue, 08 Jul 2014 11:04:33 +0000

Exactly – this is why I think there should be legislation to properly inform “customers” of what they are getting into. Kinda like the “liar loans” that got many people into trouble back in the 2004-2007 time frame…

By: Jon @ Money Smart Guides

Jon @ Money Smart Guides — Mon, 07 Jul 2014 22:27:18 +0000

Unfortunately, the ones who are least able to handle payday loans responsibly are the ones who typically use them. Because of this payday loans get a bad rap.

By: Derek Chamberlain

Derek Chamberlain — Tue, 24 Jun 2014 01:04:17 +0000

Brock,

Great point – it seems that regulation of this type of thing is very long overdue. I understand they need to make money with the high credit risk the companies are taking, but at some point it crosses the boundary into a predatory practice!

By: Brock @cleverdude

Brock @cleverdude — Mon, 23 Jun 2014 13:13:15 +0000

The problem with payday loans is that you can get one with very little check as to whether you can actually afford the loan. You can walk into a payday loan office and simply give them proof of income – but no insight as to your ACTUAL financial state. If I make $100,000 a year, but my bills are such that I have almost nothing left over – I really cannot afford a loan, but I could get one. I’d then be put into the payday loan death spiral as I pay back the loan (with fees) every two weeks, and then have to turn around and initiate a loan for the exact same amount just to keep going.

By: Derek Chamberlain

Derek Chamberlain — Sun, 22 Jun 2014 22:51:07 +0000

Frank,

I agree, but most people who take out payday loans will not be approved for a bank loan. That’s the whole point! There must be a very high interest rate because there is a very large chance that the borrower will default.

By: Frank Moreau

Frank Moreau — Sat, 21 Jun 2014 00:25:10 +0000

The only legitimate way I can see them being a cheaper alternative is if you are within days of default on much bigger debts if payment is not received within days.

The reality is Payday Lenders charge massive interest and fees. In my province they can charge $21 per each $100 lent out. Let’s say they did not charge interest…on my blog I came up with the following formula:

If we look at some numbers we can see some frightening results; let’s say that over a period of two months you took out three pay-day loans:

$1,000.00 + $210.00 ($21.00 X 10) = $1,200.00 Cost

$500.00 + $105.00 ($21.00 X 5) = $555.00 Cost

$300.00 + $63.00 ($21.00 X 3) = $363.00 Cost

The result of the loan, regardless of whether you paid it back on time, would be a net loss of $378.00 minimum just to take out the loans; 21% on top of the actual loans.

You lose money on the deal regardless. At least with banks you improve your borrowing capacity and timely repayments are reported to the credit bureaus. At least you gain something from the banks not to mention lower interest rates – crippling fees.