Are Payday Loans Really That Bad?



Well that really depends on which side of the fence you are on. Throughout the financial services world, Payday Loan or Cash Advance service companies are under fire for predatory lending practices. The truth is there are many companies exploiting disadvantaged consumers. You don't have to look beyond credit card issuing companies for a prime example of how to mislead consumers.

Are payday loan services good for consumers? I think yes. People in my own circle of friends and family have used payday loan services during hard financial times. Fees are high but understandably so. Approvals are given out generously and it is a common place for borrowers to not pay back the loan. In fact, up to 30% of all payday loan borrowers do not pay back their note. This high loss ratio results in high interest rates. So at the end of the day it is a trade off. If you think payday loans are expensive, ask someone who is unable to pay his power bill and see if they are willing to pay the finance charges.

Some things to consider before applying for a payday loan or cash advance:

?Understand that a payday loan is a temporary solution for financial emergencies. It is not a good idea to make borrowing a normal event.

?Make sure you can afford to pay the loan back within a reasonable time frame. The worst situation to be in is borrowing more than you can pay back. If your payday becomes a constant chase to pay back payday loans, you know you've gone too far. Financial counseling at this point is a must.

?Start with the end in mind. I guess this rule applies to us all. Live within your means and you may never have to use a payday loan.

The bottom-line is that payday loans provide a much needed service to a specific group of consumers. If used sparingly and with good judgment they can be a life jacket in rough waters. Abused and they can come back around to haunt you.

Randy San Nicolas is the managing partner of Launchpad Marketing, LLC and owner of www.fastmoneyfinder.com. The site provides consumers with a payday loan matching making service designed to connect lender and borrower.