How Getting a Payday Loan Can Come Back to Bite You, Again and Again

According to the old Greek myth, Prometheus, who had a soft spot for mankind, stole fire from Zeus, head honcho of the gods, and gave it to mortals. We then used it to gain dominion over the earth, build civilization and all those other great things we’ve managed since the dawn of time.

There was a price of pay though. As a punishment for his light fingers, Zeus had Prometheus chained to a rock whilst an eagle pecked out his liver. Pretty bad right? Well, that was only part of the deal. The really bad part was that every night his liver grew back, only for the eagle to come again the next day and re-peck it out. Again. And again. For eternity.

What’s the point behind discussing this ancient gore fest? Well it seems to me the punishment doled out on ol’Prometheus is not to dissimilar to the fate being faced by thousands of people who, desperate for some extra cash in a hurry, take out a payday loans.

There are a plethora of companies now operating in the “sub-prime” sector (translation; giving loans super-high interest loans to people with poor credit) and more seem to spring up every day. The concept seems simple and, at first glance, harmless enough. You find yourself short of cash with a way to go to your next payday and an unexpected expense crops up (lets say you have to buy a new suit for a job interview) and are to proud to borrow the money from friends or family.

So, you borrow a bit of money at a very high interest rate intending it to be short term (we’re talking four figures for the worst culprits, who bury the fact that the APR on their loans is 2,000% somewhere in the small print of their websites).

Next month comes around and you find that, with the interest being so high, you can’t quite spare the cash to pay the whole thing off. Never mind, you’ll get the remainder paid off next month. Then the interest accrues again so, again, you can’t quite pay it all off. You quickly realise that, just like Prometheus’ eagle, this thing is going to keep coming back to bite you, over and over.

I’ve met people who have spent years paying off what started out as a small loan and grew into a huge debt. My advice is, before you take a loan, do your sums, and ensure you actually will actually be able to pay the loan off when pay day comes. If you can’t fit it into your budget by the end of the month, there’s a good chance you never will.

The problem is that these “sub-prime” lenders make the whole affair feel so jolly and care free, with their bright spruced up websites. You can go through the whole process without feeling like you’ve made any sort of commitment at all, despite the fact that the companies know full well that a high proportion of the people they lend to will fail to meet their repayment schedule.

If you were signing up to a 25 year mortgage you’d be understandably nervous at the scale of the commitment. I’d urge you to take getting a payday loan just as seriously, it might be staying with you (and your credit file) for a long, long time.

 

Joe Thorpe has seen the ugly side of short term lending and tries to advise people on what their options are. His site, Borrowers Recommend aims to be a leading light in guiding the UK public to the right type of credit.

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