Payday Loans: Good or Bad?
The answer to that question depends on the circumstances. If it’s a true emergency-one that was totally unexpected, could not be anticipated in any way, and pretty much came “out of the blue”, then a payday loan (sometimes referred to as a “cash advance“) can be a good thing.
On the other hand, if the employees at the local cash advance office call your name out when you walk into the door, like they did to the regular patron on the ‘80s TV show set in a particular Boston bar, then it’s a lead-pipe cinch you’ve taken this (seemingly) easy route out way too many times. And, that is bad.
Print and TV advertisements make it seem like the easiest thing in the world: Walk in to the local branch, answer a few questions, write a check, get your money, and go happily on your way. When payday comes, just walk in and pay the amount of the check plus a “small” fee.
But, what happens if payday comes and there is no money to pay the cash advance loan? No problem, just extend it for another thirty or sixty days. You’ll just pay the amount of the check plus the fee, although it will be doubled to cover the extension time.
Yes, it sounds really easy, and convenient. And, it is. However, it is precisely this ease and convenience that serve to “trap” people in a vicious cycle.
There are some people out there who, when faced with an emergency that leaves them no alternative but to take out payday loans, will do so that one time, pay the loan off on time, and nothing will make them ever do it again. They will figure out a way to put a certain amount of money back from the next few paychecks to cover such an emergency, or they will sell something and put that money in an emergency account. But, they will never use a cash advance service again, ever.
Others, however, will find themselves literally using a cash advance office much like one would use a bank, “withdrawing” money for any reason, legitimate or otherwise. One day, however, they miss a payment, or find themselves unable to extend that original loan one more time, and they actually become worse off than before.
To make it worse, some (though not all) cash advances/payday loan businesses often persuade, or try to, a person to either extend the original loan or add to it. They’re going to do this because the fee is where they make their profit. And, the longer it can be stretched out, or the more fees that can be collected, the more money they will make.
Some places do try to “police” their customers, and encourage prompt repayment over extensions. Additionally, they do not use “teaser” or “get them in the door” tactics such as “first loan free” (no fee) or “make a payday loan, get a free…(whatever)”. These companies realize that most people have a legitimate need, and want to help alleviate the problem, not add to it.
Some states strictly regulate payday loan/cash advance businesses; others have only basic guidelines and regulations for their operation. Other states, however, do not consider payday loan/cash advance businesses as having any redeeming qualities at all, and, as such do not allow such businesses to operate.
Payday loans may be necessary, AT TIMES. But, as with anything else in life, the rule “all things in moderation” definitely applies here.
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Tags: cash advance, emergency, payday loans
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