Beware! The payday loan trap is out to get you

Americans spend $7.4 billion per year on payday loans, including an average of $520 in interest per borrower for eight $375 loans or extensions.[i]

While enjoying a drive into downtown Portland via Powell Boulevard, I stopped at the traffic light on the corner of 39th and Powell. The northeast corner of that busy intersection is home to a business that ranks high on my list of pet peeves: Payday loans. This booming business of get-cash-fast displays a sign the size of an elephant and twice as bold as a clap of thunder. In other words, you can’t miss seeing it. With tax season underway, to further attract passersby, they also flaunt an offer to give cash today for your tax refund before you ever receive the money.

Setting the trap

Why does this industry make my blood boil? Over the years, I’ve seen too many people caught in a “loan” trap they couldn’t escape. The entry point was a payday loan. Finances most often get worse for those caught in this trap because the business model is built to prey on the public. Quicker Cash is a business site that acts as a middle man broker feeding clients to the lenders. They are upfront in disclosing facts so deception is not the issue. Here are parameters of interest charged for a loan of this nature: The lenders in our lending network may offer you a loan with an APR between: 261% and 1304%.[ii]

Don’t swallow the bait

These are very expensive loans! Yet people sign on the line and struggle to pay them off. Smart marketing appeals to people in desperate need or to those who lack the discipline to appreciate delayed gratification. Once the bait is swallowed, the money is yours within hours. Unfortunately, before the ink dries, the trap has been set. Now it’s up to you to dig yourself out of the financial sinkhole.

The trap begins with a lie. We have all been there! You need money today, but you don’t get paid until next week. We get it, and that’s why we make getting the cash you deserve as easy and as fast possible.[iii]

We have NOT all been there! Don’t buy this lie. For some, payday might be a week away but there are better ways to make ends meet between now and then. Visit a local food bank, ask a neighbor for a loaf of bread or a roll of toilet paper. Yes, in my young adult days when my children were small, I did borrow toilet paper from a friend. Start to save loose change in a jar for those slim times and in a few weeks you’ll be surprised to find there is enough emergency cash to buy a pound of hamburger, a package of buns, or even two gallons of gas to get you to work and back.

Don’t make an emotional decision that you’ll regret later

How gullible are you? Be careful. Fast cash doesn’t always mean a fast solution. Will you make financial decisions based on emotion or do the research and keep more cash in your own pocket? Will you also warn a friend or family member to avoid this dark financial trap? Rebuilding Families One Dollar At A Time is full of information about creating smart money habits.

“Therefore everyone who hears these words of mind and puts them into practice is like a wise man who built his house on the rock.” Matthew 7:24 NIV

[This is a reprint from March 2015, The Christian Journal, and titled, The Dark Trap of Payday Loans.]

[i] http://www.prnewswire.com/news-releases/nationwide-pew-survey-challenges-conventional-wisdom-on-payday-loans-162943546.html

[ii] www.quickercash.com

[iii] www.quickercash.com

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