Why Are Payday Loans So Bad? By Edward Maggio,Esq.

Edward Maggio, Esq. says - Essentially, if you have an unexpected expense (or an expected expense that you just cannot pay), you can walk into a payday lender, make out a check to the lender, date it for the day after your next paycheck is going to come in, and walk out with what is essentially a paycheck advance.

Sounds like a pretty good deal, right? Except that payday loans, because of their extremely short terms (usually two weeks or less), have extremely high interest rates. Those rates might be fixed and you might know the exact price of that loan when you sit down to write a check, but that doesn’t make them any less unreasonable.

Where most people run into trouble is actually paying the loan back. While you might provide a post-dated check to the lender, which they automatically deposit after your paycheck comes through, they also take cash or expect you to come back and pay the debt in person. If the person is even a day late, he can be slammed with massive fees. If the loan is allowed to roll over, it can quickly become too expensive to pay back. For example, a $500 loan that rolls over only eight times (eight months), can end up costing more than $700.