We have been asked over and over if there are any safe payday loans. We will cover this question and also offer some pretty interesting payday loan statistics and facts in this post.
There are differences in payday loans and believe it or not there are safe payday loans, but you must understand what makes them safe and which ones out there are not safe.
As with any financial adventure, even the best of intentions can result in any of these types of loans, or any other types for that matter can become unsafe in a hurry and we will address that a bit later in this post.
Payday loan debt trouble?
Before we get into the facts and statistics lets review what a payday loan is.
Payday loans are high-interest short-term loans and this alone makes them a risk to anyone who may take a loan out.
They become more of a risk when you figure in the majority of borrowers have bad or no credit and low income.
Add on the risks of rollovers and multiple loans and you end up with a very dangerous way to borrow money.
Here is a link to Wikipedia for their definition of a payday loan
The average estimated income of a single payday loan store per month is around 25k. This represents a profit margin on investment of around 805% for the owners.
This is a pretty good return for the store owners money.
Unfortunately, most of this profit is on the backs of people who can not afford to contribute to this in the first place.
Here is a very interesting fact. Most payday loan customers will pay an average of $574.00 in fees and interest on any one single loan that has been taken out.
A few more facts:
- 33% of borrowers make around $30,000 a year
- 20% of borrowers make under $20,000 a year
- 65% of borrowers will get one or more overdraft related to the collection of payday loan payments.
- The average borrower will be in debt for 7 months per calendar year due to these loans
- 80% of payday loans are rolled over
- The average borrower will roll over a payday loan 6 times before it is paid off
- Only about half of all payday loan users are able to pay off a payday loan in full on the first due date. (Safest way to use payday loans)
As you can see the cards are stacked against the payday loan borrowers unless they follow strict payback rules and do not extend a payday loan for any reason.
Safe Payday Loans
We all end up in situations in life where we must come up with emergency money for various reasons.
A new TV or the latest cell phone are not reasons to take out a payday loan.
The only time a person should even consider one of these loans is if it is a life or death situation. I know this sounds drastic but it really is true.
A broken car that gets you to work, medicine for the borrower or immediate family member are valid reasons to risk a short-term high-interest payday loan. These kinds of emergencies do come up and must be addressed, but please do your best to find alternative ways to raise the money.
If all else fails and you must take out one of these loans be informed and have a plan.
You can use payday loans safely and we will explain how to do that.
Your one and only plan should be:
- Paying back the loan in full on the first due date, PERIOD!
- NEVER extend a payday loan
- NEVER take out more than one payday loan at the same time
These rules must be followed to safely use a payday loan, without exception. You will pay a high-interest rate but when you make the payment the loan is satisfied and no more fees or interest can come back to haunt you.
A note about online payday loans.
These loans can be used safely by following the above rules but they are set up with a unique payback system that is geared to cost the borrower dearly if they do not follow the payback rules to the letter, so understand what the companies rules are and follow them. READTHE FINE PRINT!
These companies do offer help for those who can not find it elsewhere, but there are rules to follow to avoid getting caught in the payday loan trap.
If you follow the above plan you can use these loans safely and they will not become your worst enemy.
We hope this article helps you in your future endeavours in the payday loan world.
Return to the top of this page