Payday Loans

June 10, 2010

Several days ago, NPR Fresh air had an interview with Gary Rivlin, the author of Broke USA. He examines pawnshops, payday lenders and related businesses. The link of the story and the audio interview can be found at this link:

This is a multibillion dollar industry, where the entire business model is to take advantage of desperate and poor people. On the surface, they claim to be helping people because they come to the rescue for those people who need the money right away and several days before the pay day.

In reality, the interest on the several day early withdrawal is so high that causing the people be in deeper hole when they get the pay check. These people tend not to have savings and much of a wiggle room. So, any additional interest they have to pay on top of their expenses, will create bigger and bigger gap to try to pay back.

At this point this business is still legal. The morally questionable line was blurred when the reality is that they make so much more profits off of the working poor than the prosperous people.

The moral of the story is to avoid doing business with them at all cost. Being “forced” to do business with them is just a symptom of a larger problem. Some of the possibilities of the root problems:

1. Income issue, which means either need to get a different job, or have additional jobs.

2. Outgo issue. This means you spend more than you make. This is a problem even for people who make 6 digit income. Cut back the spending and live within the means.

3. No idea what’s happening with your money. Get a spending plan/budget. This will cause you to be proactive and tell the money where to go instead of being reactive and worry all the time. Not to mention if there isn’t a margin, a little life bump will turn anything into emergency.

For people who really need help in taking control of their financial life, this may be a good place to start:


2 Responses to “Payday Loans”

  1. I just can say what a relief to find someone who actually knows what they Are talking about on the internet. You definitely know how to bring an issue to light and make it’s important. More people need to read this and understand this side of the story. I can’t believe you’re not more popular because you definitely have the gift.

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