Payday Loan Warnings: What You Need To Know

We all have heard the drawbacks of payday loans

. All of these warnings can make us more than a bit hesitant of payday loans, but what is fact and what is fiction?

In order to make a well-informed decision regarding a payday loan, you must have all of the information, and it must be based on facts. However, given the backlash of payday loans by many lawmakers throughout the country, the facts of payday loans quickly become lost in a sea of false warnings and inaccuracies.

Interest Rates and Fees

Lets first talk about the interest rates and fees associated with payday loans, as this is the topic most often discussed by lawmakers. It is true that the interest rates charged by payday lenders are quite high; however, when you consider the fees charged by some banks for overdrawing your account or bouncing checks, or the fees imposed by credit card companies if you make a late payment or exceed your credit limit, then it quickly becomes quite clear that payday loan fees do not stand out in terms of fees and interest rates.

Cycle of Dependence?

Secondly, another warning often posed by lawmakers is that a payday loan encourages a cycle of dependence. However, when you consider the dependence many people in the country have on credit cards, payday loans are no different. The only big difference between payday loan advances and credit cards is that most people pay on credit cards for a long time, while payday loan advances are a quick loan that is typically paid off within a couple weeks.

What is worse: a short-term payday loan that is satisfied within a couple weeks or a credit card bills that is often paid on for months and even years?

Education is Key

The many warnings that come along with a payday loan are often necessary to educate people on the downfalls to obtaining short-term cash; however, in the process, many of these lawmakers are failing to realize that payday advances can often be a convenient and practical solution to many consumers short-term cash flow problems. In addition, for many individuals with either poor credit or no credit, payday advances may be their only solution to their financial problems.

Along with the warnings must come an understanding of who uses payday loans and why they use them. For many individuals, these types or short-term loans help out immensely during a financial crisis, so it is important to continue to let consumers have access to payday loans and payday lenders. Otherwise, they may be left with little options when it comes to settling debt and securing fast cash for financial emergencies.

Although you should consider the warnings provided by lawmakers regarding payday loans, it is also important to do your own research so that you can decide if a payday loan is right for you; after all, you are the best person to decide which financial decisions are right for you.

by: Janet Gaither

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