The title is drastic because we seriously need to get your attention. There are several reasons why Payday loans are bad for your budget. The basic principle behind them is that you take out a loan, and when you get paid, you pay the lender back – plus some (whatever the interest rate is in the contract). This means that you will be paying back your entire paycheck and more. Here’s the problem, if you didn’t have enough money to pay your bills before your paycheck, how are you going to have extra to pay back the interest for the payday loan?
I once had a friend we’ll call Jane who thought that getting a payday loan was her only option for paying bills for the month. I desperately tried to tell her that getting a payday loan was a terrible idea and, of course, she didn’t listen. Not only did she not pay back the payday loan at her next payday, she ended up spending more and had to eventually take out another payday loan. Payday loans are bad because they give the illusion that you are able to get a quick-fix, but they have many hidden pitfalls.
Why Payday Loans are a Bad Idea
Usury. This is a Biblical concept, where lenders charge way more interest than is reasonable. There is legislation aimed at payday loan companies to protect the consumer against unreasonably high interest. However, there still seems to be a payday loan company in every strip mall.
Your budget is non-existent. If you even have to think about a payday loan you aren’t living on a budget or you are living beyond your means. I understand that sometimes medical bills come up, and other unexpected things in life, and many people don’t have financial support. However, in most cases payday loans come from bad budgeting. Sorry, I know that my hurt some feelings, but I love my readers enough to be honest. Please check out our Financial Freedom Plan so you can get on the right track.
You’re Heading in the Wrong Direction. Going into more debt is completely against a debt-free lifestyle. It is also cyclical, and is almost like a prison. It’s time to break out of that cycle. Our Financial Freedom Plan shows you how to set up a budget, repay debt, and start living a debt-free lifestyle. It might be time for you to think about going on our 31 Day Spending Freeze. Sometimes you need to hit the reset button on your spending habits, and we’ve had hundreds of people go on this freeze with us.
D-Day. The day when you don’t have enough to pay even the basic bills. This day will come, and we’ve even helped friends personally with their budget, and have seen this happen to them when they don’t heed advice. Just like labor pains indicate that birth is coming, payday loans are often the precursor to financial ruin. It is time to turn your train around and head in the right direction.
Another option. Instead of going into more debt, it may be helpful to get a side hustle. This is where you find another way to earn extra money to pay your bills. We have a list of 50+ Side Hustles to Help You Get Debt Free. You can also read our personal story about Our Top Side Hustles that Helped Us Get Debt Free. Sometimes you need to work hard to maintain a debt free attitude. You can also follow along on our Debt Free Journey if you need inspiration!
Have you ever taken out a payday loan? Did you feel it was worth it? What were the pros and cons? Comment below!
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