advice on payday loans

neophytebloggerAugust 23, 2007

Hi everyone, I've been trying to research about payday loans because someone has told me that it would give me quick cash, although the paying rate would be somewhat higher than what I'd originally borrowed and that checks are involved. I found useful information on the National Payday Website but would want to know from those of you who have taken payday loans or know someone who did. Should I go for it? I have a fulltime job that pays on time.

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Hi neophyte blogger,

I've asked at a payday loan office about their fees but when they asked how much that I wanted to borrow and I told them that I didn't just now, but was seeking info, they didn't want to talk to me.

If you've held a mainline credit card and always paid off your bill each time that you received your account, you were paying no interest.

But if you don't pay off $100. of your account, suppose you could let it run at that level for a year, their fee would usually run 15 - 18% annual rate. Of course, you must make payments monthly, but the minimum amount is usually such that your monthly payment is almost all to pay the interest for that month and you pay off only a small amount of the principal.

That means that you just arranged to reduce your annual income by a minimum of $15.00 - 18.00, and a total of up to $118.00, if you pay off all of the principal next year.

Not only that, most of the stuff that most of us buy using our credit card isn't tax deductible, so if we are in 20% income tax bracket, we must earn that much more before tax, i.e. $18.75 to $22.50, in order to have the $15.00 - 18.00 after-tax money available to pay the credit card interest.

If we use store-issued credit cards, their fees usually run 25 - 28%, which means that we must earn $31.25 - $35.00 before tax, if our rate is 20%, in order have enough to pay those fees.

Most payday loans are for only a short term, often up to a couple of weeks (i.e., next payday).

Though the fee may appear small, when one calculates the annual rate of interest which is involved, I think that it will be very high.

It is my feeling that most people interested in making wise use of their money should try to avoid using payday loans like the plague.

Some of those offices also cash cheques ... and they usually charge about 2.9% for doing so.

Some time ago they put a change-sorting machine into the local supermarket. They charged 9.8%, I think that it was, for the privilege of using it.

One day when I saw a lady about to use it I asked her if she knew what fee they charged ... when she found out, she paddled off out of there in a hurry!

One would be better off paying his kids 50 cents to sort and roll $10.00 worth of coins.

As I live in Canada, where our $1.00 and $2.00 units of currency are coins, I hope that someone planning to use that machine would pick out the Loonies and Twonies before s/he dumped the small stuff into the machine!

I hope that you'll make substantial efforts to make your money work for you more than it works for the other guys.

Good wishes to you and yours.

ole joyful

    Bookmark   August 23, 2007 at 7:16PM
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tishtoshnm Zone 6/NM

My advice is to stay away, far away. My mother got caught in the trap of payday loans. The yearly interest rate came out to 700%. I would just rough it until next pay day than try to get some extra cash through a payday loan. If you are unable to borrow money through other means like banks or credit cards, then you should not be borrowing money. If you need some extra cash, I would suggest finding some extra work. If you do, any money you earn will be all for you and none for the loan sharks.

    Bookmark   August 23, 2007 at 7:57PM
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For a fast education as to what payday loans can do to you visit the prosper dot com site. That's a place where everyday folks come to borrow money (oftentimes to get Payday loans off their back...). It's a nightmare waiting to happen!!!!

    Bookmark   August 23, 2007 at 8:38PM
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(sniff... sniff) hmmm. Well, maybe I'm a bit overly suspicious of anyone who signs up to post their first thread about a particular money making site. Any relationship there?

Why not just wait for the paycheck?

    Bookmark   August 23, 2007 at 11:43PM
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Chemocurl zn5b/6a Indiana

although the paying rate would be somewhat higher than what I'd originally borrowed how much higher...I think that should be the question you should be asking and finding out for yourself.

Sheesh...folks at Money Saving Tips know better than using such things.

Get a grip!

    Bookmark   August 24, 2007 at 1:22PM
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Those darn Payday Loan shops are sprouting up around here like rashes on a kid just coming down with scarlet fever.


Blood-suckers draining the wallets of folks who, in almost all cases, can ill afford the fees.

ole joyful

    Bookmark   August 24, 2007 at 11:22PM
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which brings me back to my original question.... why not wait until payday? Bank the fees and you're ahead! Yes, it might mean no MegaBucks coffee every morning and, well, everything we've talked about before, but getting the start on that nest egg can't begin too soon.

    Bookmark   September 20, 2007 at 8:08PM
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Maybe I should start-up a Payday lending company.

    Bookmark   September 20, 2007 at 9:41PM
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Hi mikie,

I thought that would be a great money-making idea, too.

Trouble is, Dad, as would Mom as well, had she been around ...

... and church ...

... both taught me that I should develop some semblance of a conscience.

Hope you're having a lovely autumn weekend.

ole joyful

    Bookmark   September 21, 2007 at 5:44AM
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