January 9, 2009, Newsletter Issue #40: Myth: Quick Payday Loans are Predatory Lenders

Tip of the Week

In reality, quick payday loans fill a necessary component in the economic world. Considering that most middle class persons are in credit card debt already, it often becomes impossible for them to receive emergency quick cash for emergencies, medical expenses, or other needs that may arise between payday. Furthermore, since quick payday loans are only short term cash advances that are not based on your credit, this adds an additional service to the middle class person.

The problem is that people and organizations have a tendency to focus on the interest rates. At first glance, the interest rates may seem high. So, consider that a person needs an immediate loan of $100. Their options are to place the $100 on a credit card with a 7.9 percent interest rate or to take out a quick payday loan with a 15 percent interest rate. Now, most people do not pay their credit card balance in full when it is due. They only pay the minimum balance, which covers the interest rate. This can take a very long time to pay off the full amount. With a quick payday loan, the $15 fee does not accumulate past the payment remittance date unless you decide to re-submit for another payday loan, which is not recommended in quick payday loans. Also, there are no annual or hidden fees with quick payday loans. This is less predatory than credit cards who alter interest rates and apply hidden overcharge and hidden annual fees to the credit card. However, it is important to understand that quick payday loans are NOT credit cards. They should not be used as credit cards, but only used for immediate emergency needs.

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