Are Payday Loans Bad?

You hear about these payday loan companies and sometimes they get some bad press. They seem to get accused of charging interest that's too high or that they prey or take advantage or people that have a low income. Here are some thoughts:

• Having high interest can help deter people from using their service. Getting these loans all the time is not a cycle you want to get stuck in.
• Payday loan companies are taking a huge risk. They give away these loans usually without collateral, so it's very possible that they might not ever get paid for the loan. I'm sure this happens, so the higher interest pays for the other people using the loan service where they've lost money.
• These companies also need to pay their employees and have money available, so the interest pays for that. They're not setting up a 5 year car loan or a 30 year mortgage. These short loans have some service costs and they can't make that up in the long term.
• Often the people using these paycheck advance loans are missing payments with their creditors and could have lots of late fees adding up. So the higher interest of a payday loan is often less than these late fees and if people use a payday loan, they can make these other payments and have less bad marks on their credit. Less stress, too.

There is a need for these short-term loans and with the risk that the lender is taking, the higher interest makes a lot of sense.

Find out when are the best times to get a payday loan.