Recently, I had a conversation at the Financial Blogger Conference and Pay Day Loans came up. First off, I was kind of surprised to hear a financial blogger say that these loans had their place because most bloggers agree that these types of loans are dangerous and avoidable. At the time my mind was spinning a hundred miles a minute but I said nothing because not only had I just arrived at the conference, but I know that debates like this are rarely productive (especially with a financial blogger). So I bit my tongue but I do have an opinion and thought I would start a discussion here instead.
I think pay day loans are for lazy people.
I do realize that statement may bother a few of you but I believe it is accurate and here’s why. These loans are unnecessary and I believe a majority of people who get them have not run through all of their options. To me it’s like filing bankruptcy because you don’t want to do the hard work it’ll take to pay off your debt. The easy way out is hardly the best option most of the time but I realize there might be an extremely small percentage of situations where this could be a last resort. But please notice my emphasis on EXTREMELY SMALL.
People will tell you that getting a loan of this nature is necessary because they need to pay their rent or mortgage, keep their utility services from getting shut off, or because they desperately need to put food on the table. These are all real needs that should be addressed but there are better solutions and alternatives to pay day loans.
The truth is that pay day loans generally “help” people who have not made the important financial decision to transform their finances, nor do they wish to address the problems and behaviors that caused their dire need in the first place. That is unfortunate and I refuse to ever suggest that these types of predatory loans have their place in a responsible decision making process. They usually end up causing a cycle of despair since the money borrowed must be repaid and when it is, the need for the missing cash still exists. This causes the person receiving the loan to get another loan and another and another. Do you see the danger?
Why is it that such an expensive route to solve a problem is considered acceptable by some? More so, why is it that people fail to observe the expensive nature of these loans and how they tend to make a bad financial situation even worse? I have seen it with my very own eyes within my very own family. The cycle is vicious and it doesn’t care if it destroys you or your future, it only cares about receiving the interest you agreed to pay. And pay you will.
In fact, The Federal Trade Commission says Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives. I have come up with a short list of alternatives I think are much more productive than the lazy approach.
Pay Day Loan Alternatives
How do people with real needs avoid using pay day loans? Here are a few things to consider before making the decision to sell your soul to a predatory agent of darkness. Yeah, I said it.
Pick up the phone.
You’d be surprised to find out how many people fail to pick up the phone when facing turbulent times. Sometimes the solution can be found in a simple phone call to the business you owe money. If you are behind on your rent, mortgage or utilities, communication can go a long way. I think we often get caught up in the fear of admitting we’ve fallen behind and our egos keep us from taking this step. Is that a good enough reason to pay outrageous fees and interest? I think not. The thing that causes businesses to come after their money aggressively is the lack of communication so keep this in mind before you choose to ignore your responsibility by dodging this easy alternative.
Visit a local church or food bank.
This is a powerful solution to filling an obvious need in the community, because after all, if there were no demand for pay day loans these companies wouldn’t exist. I made a quick call to my church to find out what kind of programs are in place locally that are designed to address this need. Not only is there a big network of churches who cooperate with a local organization but there are churches who do the same thing outside of this network. What’s even better is that these community services aren’t loan based at all. It’s simply an act of love and generosity from people who really care. After also doing a Google search for food banks in my area I quickly found more than a handful of places ready to help. For example, The Blue Ridge Food Bank locally serves on average about 92,000 people each month. These places exist for a reason and it bothers me that someone would resort to mating with Satan rather than visiting a food bank or a church to ask for help. Is it bad to say mating with Satan and church in the same sentence?
Work overtime or find a job on the side.
It amazes me at how many people over look this option. I certainly understand parents with kids who already work a lot and just don’t have the time or ability to do this (at least in the traditional sense), but I have known single people resorting to pay day loans instead of working an extra job or asking their boss for over time. With that said, there are all kinds of things people can do in any situation to make a few extra dollars. It may take some creativity but you would be surprised at how inventive your mind can be when you are in a pinch. Use that to your advantage.
Sell some stuff.
SELL. YOUR. STUFF. In other words, before selling your soul to the devil, sell your big screen television instead. Look around the house at all your material possessions and decide what you can do without. My wife uses craigslist and eBay religiously to constantly purge our home of unneeded crap but she also buys from yard sales and thrift stores to purposely resell. Give it a try and find out why it’s a much better solution to your immediate needs than getting gobbled up by a horrible financial product.
Cash advance from your employer.
If all else fails and you are having trouble with any of the above, a last resort could even be to ask your employer for a cash advance. Technically, this is the same thing but without the fees and interest and some employers will work out a payment plan so a little comes out of each check. Just don’t make this a habit because not only does it tell your employer you are in financial trouble but it also screams that you may not be management material.
If you fail to do any of the above before ringing the devil’s doorbell isn’t it out of pure laziness?