Raising cash in a hurry #9: Get a payday loan
Update May 2009: New restrictions on payday loans have driven many locations out of business, while others scramble to find ways to skirt the laws. Notnetheless, for many people who need that one-time bridge loan, these businesses still serve as a last resort.
Somehow I've managed to become WalletPop's poster child for payday loans. I wrote about my experiences with them a few months ago, and then quickly wound up being asked to write a little series about payday loans (the series is at the bottom of the page of just aforementioned post). And now that we're doing a "raising cash in a hurry" series, what does my editor suggest I write about? You guessed it.
It is true, though, that earlier this year I went to a payday loan store. Not once. Not twice. But three times. And in those cases, I was able to get cash in a hurry -- faster than most of these other ideas we have, I'll bet. But that doesn't make it the best of the ideas.
I'd call it one of those last-last-last resort methods, but I have to give the payday lending industry its due, it is quick. Once I made my decision, it took me about 14 hours and 20 minutes to get my money.
That is, it was 14 hours because I made my decision and then slept the whole night, nibbled on breakfast, did some work and then drove out to a payday lending store near my home. Once I went through the doorway, the whole process took maybe 20 minutes, and on the subsequent times, perhaps a five minute visit each.
In my case, I think it was the best plan I could come up with. I knew I had money coming, and that I'd be able to pay it back. Some magazines were simply very slow in paying me for articles I had written months earlier, my credit cards were maxed out, and I didn't like my options: humiliate myself on the altar of the Bank of Mom and Dad or further deplete my depleted savings.
But it can be a dangerous strategy, of course. If you're on a fixed income, and you borrow $300 and know that in two weeks when the money comes due, you'll have to pay back $345 (which was the case with me, anyway), that means you have to account for the fact that your next paycheck is going to be $345 less than what you're used to. That can be a problem. You may fall short of money sooner than you expect. You may decide you need some cash. You may decide to go to a payday loan store.
And on it goes.
And so it did for me, enabling me to go three times in about two months before enough checks of mine had arrived that I was back to a receiving a steady revenue stream.
If you do feel like you have no other choice than to visit one of these establishments, make sure to take along proof of employment, which can be tricky if you're self-employed, but it's still possible -- just bring lots of documentation. Obviously, regardless of your work situation, take along a photo ID like your driver's license.
Sure, given the payday lending industry's reputation, it may not feel like the best road you can take. But it's a perfectly legal one. I'm still trying to figure out why payday lending is perceived as such a worse option than plastic, with its universal defaults and variable interest rates that can also, if handled improperly, destroy your credit.
Bottom Line: If you're responsible with your money and know that you're facing less than two weeks of a cash short fall, borrowing $300 today in return for repaying $345 in two weeks may be a good idea. If you're the sort of person who has a continual spending or money management problem, this is the dumbest thing you could possibly do.
Geoff Williams is a business journalist and the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).
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Reader Comments (Page 1 of 1)
6-17-2008 @ 6:18AM
beth said...
Payday loans are the worse thing that you can do. I took one out and then unfortunately i wasnt able to pay it back within two weeks so they kept taking money out and by the time i was finish paying it off the finance charge alone took me for a few thousand dollars. Do not ever take out a payday loan unless you know for real you can pay it back within the two weeks period otherwise u will be screwed for a long time. Thank g-d all my payday loans are paid off and i rather starve then take out another one. People listen to what im saying payday loans are no good they kill u interest and messes up your credit. please ask your friends and family first so you dont get into a mess the way that i did. Had a 200.00 payday loan was suppose to be paid off in two weeks with a 90.00 finance charge unfortunately i lost my job found another one but couldnt pay...its terrible what they do for you...think very carefully before you decide to take one out because the interest is like1000 percent.
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6-17-2008 @ 1:44PM
SassyKat said...
The pay-day loan industry is nothing more than legal loan sharking. I mean, look at the annual percentage rate of interest on the loans!!!!! Over 300 percent. These scavangers take advantage of the low income/poor people who are desparate enough to use them.
Believe me, I was sucked in and was out to 5 different loan places at once! I had to spend 2 hours on paydays just going from one place to the other to pay the interest and rewrite another check to pay the next guy. I finally had to file for bankruptcy to get out of the mess.
It started innocently enough. I had been sick, rent was due, I was a couple of hundred short. Went to payday place, got the money, paid the rent, but guess what???? Two weeks later I was $230.00 short!!! And so I went to another....and so on, and so on....
PLEASE, PLEASE, PLEASE, don't go to these businesses. The only way to force them out of business is not patronize them. Hell, even the military has seen what this industry is and has instituted rules protecting the soldiers from this bad business.
Just try any and all other means of making money, BUT STAY AWAY FROM THE PAYDAY LOAN INDUSTRY!!!
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6-17-2008 @ 3:40PM
Nicolis said...
I work for a payday loan place, and yes it's not the wisest thing you can do, but if you're responsible you can pay it back, here in AZ we have extentions, and if u borrow more than you can pay back it's bad, Payday loan places aren't that bad, just be responsible and check out the company's reputation before you go to that paticular one. The payday loan place I work at will help customers and make sure we can work out a deal if you can't pay it off. Credit cards are the worst you can do because if u don't pay they can kill your credit a lot faster than any payday loan place can.
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6-23-2008 @ 11:42AM
Payday Lending Rep said...
Payday advance compares favorably to many consumer alternatives, even when expressed as annual percentage rates for two-week terms: $100 payday advance with $15 fee is 391% APR.; $100 bounced check with $54.87 NSF/merchant fee is 1431% APR; $100 credit card balance with $37 late fee is 965% APR; a $100 utility bill with $46.16 late/reconnect fees is 1203% APR; a $100 off-shore Internet payday advance with $25 fee is 651.79% APR; $29 overdraft protection fee on $100 is 755%.
Like many other financial products, payday advances may not be for every person's financial situation, but do offer a great service for people in a pinch.
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6-25-2008 @ 2:57AM
payday news said...
payday news also latest source for payday news.
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9-01-2008 @ 1:41PM
tee said...
Please help!! willing to pay off payday loans, but I am mentally tired from running to one payday place to pay another , should I closed my checking account with three outstanding loan & make payment arrangements so I CAN'T borrow again & the big question is can I closed my account , also in the process of bankrupcty so this has to STOP.
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