Why Payday Loans are a Major Rip Off

Payday loan companies are spreading like a rash and like a rash they can lead to unpleasant circumstances. These companies have flooded the internet, they have major adverts on tv with household celebrity voice-overs and  in lower income areas they are setting up multiple numbers of shops in high streets.  They work on the problem-solution principle. By that I mean they offer a perfect solution to an immediate problem.  If you are short of cash they can  have cash in your account within, in some cases, as little as 30 minutes.  But remember what I said elsewhere, when you are debting, you are spending someone else’s money.  There is no doubt that they do help with cashflow and this is effective in the lean days of the month but the cost is huge.

The reason they work is simple, they enable you to have money when emergencies happen. The problem is they change the way we think.  They encourage us to become lazy and not to either work harder to earn more money or to find a solution to our cash crisis. The result cannot be good. However you view it, a payday loan is a way to spend money before you have earned it.  In some cases it is money that will never be earned, it will remain as debt.

It is worth saying again:

‘when you are debting, you are spending someone else’s money. ‘

Dr Graham Lawler


The possibility of overspending is huge when you are using payday loans. It is worth remembering that just because you have taken the loan does not mean your wages/salary will go up.  So instead of having a spending plan for your money that will take you to the end of the month you are spending more and simply postponing the debts to another month.   If you are considering a payday loan you have got your money management wrong.  Taking the loan will not solve this problem, it will make it worse.  To solve the problem you have to recognise that you first have the problem and look for ways to move to another month with no debt.

The cycle continues

Think about it, if you take a payday loan this month, then you are spending next month’s money. So you will be short next month. You must be, you are already spending money you have yet to earn. So that means you will need another loan next month.  It really is that simple.  You will need to make a repayment this month so next month you will have less and so will need to borrow more.  The debt is bound to grow because you will have to pay very high interest rates. Interest is  the fee you pay for the right to spend other people’s money.  This means you are becoming dependent. This is what they want.  The loan companies want you to become dependent on them.  If you keep going down this pathway you will have less and less to survive on and you will be trapped in a downward spiral of debt.   Who do you think pays for their fancy offices and their fancy cars? Who pays to send their kids to posh private schools?   We do when we borrow at ridiculous levels of interest.  Their posh houses and limousines are paid for by people like us and that is why this is not sustainable, we cannot carry on this way.

Too high interest rates

If you are using payday loans you are being ripped off.  Their interest rates are eye wateringly high and they make sure you pay far more than a high street bank would charge for a bank loan. In the end you will spend far more money than you could ever have spent and this loss will hurt you and hurt your finances.  You will have to payback the money and you will be buying their fancy lifestyle for them.  Instead of payday loans, if  it is urgent try borrowing off a friend. If you need food for the family swallow your pride and  go to a foodbank. Look for clothes in second hand shops, do anything but borrow at these rates.

Unnecessary borrowing

Paydayloans are like an addiction. Once you start you cannot stop. ‘ I only need a bottle of wine’, do you really?  ‘ I just needed my cigarettes’, no you don’t. Look at one of my other blogs on cigarettes. Apart from the fact that they kill you, the average smoker spends about £2500 a year of  cigs, if you don’t smoke you don’t need a payday loan. You would have £2500 in your pocket.  In the UK you can get emergency loans from social services so talk to them first before you go to a payday loan company.  Never, never be embarrassed by saying ‘I can’t afford it’, because most people do say this at times in their lives. People on normal expenditure should try to keep away from payday loans.

Making your bad credit worse

One of the benefits they try and flog you is that you can get a loan even with a bad credit rating. The thing they don’t tell you is that payday loans make your credit rating worse.  Think about it, a debt is a debt, and a bad credit will not get any better by you taking a payday loan. The only way to make your credit rating better is to pay down or clear your debts. Some people actual;ly think it is free money, and go on a spending spree.  This is crazy. In my Back to the Black book I tell a story of a woman who took equity (increased value in her home) out of her house and spent it on rubbish. She said it was ‘free’ money. It wasn’t. All she did was increase her debt on her home.

Think about payday loaners as sharks. That is why they are called loansharks. They look after themselves.  They do not care about you.  They like the fact that you are in a desperate situation so they can take advantage of you. They are the shark and you are the minnow and they will eat you.  They will make sure you are kept captive by having to keep going back for more loans.

If you want financial freedom then think about what Thomas Edison, the inventor of the light bulb, said:

“never spend your money before you earn it’.


8 Comments on "Why Payday Loans are a Major Rip Off"

  1. Oh my…

    Payday loans, one of my pet hates

    I have a work colleague who has got herself into a real mess using one of these vultures

    It’s about time the government sorted their excessive interest rates out

  2. wow Graham your post is certainly an eye opener.
    Lucky for me I have never been tempted by them, but is must seem like a life saver to someone who is in urgent need. They act first and don’t think about the consequences of their actions.

    Take care

  3. Graham

    I believe that one important subject that should be taught in school is Money! Making kids aware of the problems of debt and borrowing at an early age would help a lot of people in later life.

    I believe my kids have been taught the value of money and to respect it since they were young, but see their cousins having money thrown at them by their Dad and can see problems there once they have to make it on their own, so to speak!

    I despise these companies, but they are only the modern day equivalents of the local money lenders who charged ridiculous amounts of interest and knocked on your door every week for their few shillings! That is not from personal experience I must add!


    • Dave
      you are quite right and I am happy to tell you money has been introduced into schools. It has the fancy title of financial capability but it is there.
      to your success

  4. Hi Graham,

    I hate payday loans. I hate the scumbags who peddle this as a real “solution” to your financial problems. When you look at the small print and see just how much interest you pay back (some are 9,465% pa!) you can see just how easy it is for someone to get further and further into debt.

    There really should be some sort of control over exactly how much they can charge. If a bank has strict controls over their interest rates, why not these money grabbing, misery inducing, bottom feeding parasites?

    Sorry, they just make me so angry.

    Great post BTW!


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