Reasons Not to Use a Payday Advance

Avoid Payday advancesAn emergency can happen to anyone, and often those emergencies require quick cash. Low-income consumers often turn to payday loans in their time of need. The truth is, however, that payday loans are a type of predatory lending that’s outlawed in many states. Are payday advances really that bad? Read on to find out.

 Cost of Borrowing is High

Payday loans are typically charged at a fixed-dollar fee, such as $15 per every $100 borrowed. That’s an exceptionally high rate to pay. According to the Center for Responsible Lending, the average two-week payday loan has an annual interest rate between 391 and 521 percent.

 Fees Quickly Add Up

If, for some reason, you’re unable to repay the loan by your next payday, the fees begin to add up quickly. How quickly? Over a two-month period, an original loan of $325 can accumulate as much as $793 in fees in addition to the original loan amount. Payday advance lenders count on the continuation of the loans, though, because it brings in a lot of cash to the tune of $3.5 billion in fees each year.

 It Encourages a Cycle of Debt

Those triple digit interest rates can make a bad situation even worse. When you’re short on cash, in many cases, your finances won’t improve dramatically in just a couple of weeks, requiring you to roll over that payday loan if you can’t pay it off right away. Each time it’s rolled over, more fees are added making it harder and harder to afford to repay the loan.

 It Exploits the Poor

The real problem is that payday advances exploit the poor. Middle-class and upper-class borrowers don’t turn to payday advances when they need money; they turn to traditional lenders. People with poor credit and hardworking low-income families—especially those in rural areas—do not have access to those resources and instead turn to payday lenders.

 There are Better Alternatives

Almost any option is better than a payday advance. If you need the money to pay a bill, ask your creditor for more time to pay or negotiate a payment plan. Charge the bill to a credit card or get a credit card cash advance. Ask your employer for an advance, or ask a family member to help you out.

A payday advance is not the answer to your financial emergencies but it can be beneficial in some circumstances. . Most creditors are willing to work with you on payments, and some states offer emergency financial assistance to low-income families. Use one of the alternatives mentioned and work toward building up your savings to cover emergencies in the future.


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Written By
Sydney White is a Texas-born stay at home mom who enjoys spending time with her family, bargain hunting and, of course, writing. She is currently the editor-in-chief of

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