Are Payday Loans Ever a Good Idea? 

While the short answer is “No”, I’m glad they go over the numbers and figures about the situation with PayDay Loans. I’ve seen many videos about them, but I think a reminder to the public at large (or an audience that may not know) is always a good idea.

My financial professor worked at a payday load office as the only thing available for a job after school. He said it like burning in hell. He’s now educating people both in the university and at his own office about the dangers, and still fighting to stop them entirely.

I got into finance from a desire to help people but nobody would hire me but a payday loan company. It was torture. People on fixed income refinancing every month, people who I knew wouldn't pay us back and it'd be worse for them. We did underwriting and had a lot of angry people because of it, but there are plenty of people who *technically* can pay back loans but really shouldn't. The only situation I can see payday loans being "good" are if you are paid well, have no safety net of savings and have an emergency where you dont have the money right now and you desperately need it. Even then, the solution is to have an emergency fund you build before the emergency happens. Remember, a penny saved is a penny earned post tax.

Unfortunately, many still need to resort to these.... It's not a choice, it's deciding to survive another week so your children don't starve on the street.

No. They are predatory loans. I remember learning about these. The interest rates are insane.

I literally found this channel a few months ago because I wanted to become more financially intelligent after creating a massive debt due to payday loans.

5:20 if you are the borrower it is always better borrow from friends and families.. but if you are the lender, be careful of lending to friends and especially to family.. cause there is this mind set from borrowers , that "since you borrow from close relative, they will be no fees, no tax, no interest and even it is ok to miss a couple of times when the deadline hit" and the reverse is also true.. it is much, much harder to collect from families..

Pay day loans are loops that are hard to get out of. I was stuck in one for a while. Until one day I had enough and told myself I have to get better with my money. 2 cents "Dumb with money" video was the first video I saw and then i watched all the 2 cents videos and realized I had to budget in order to get out of the pay day loan trap. I then applied Dave Ramsey's baby steps and now I always have money and have not gone back to a pay day loan place. 💰

I miss the moustache I worked at one of these places for like 2 weeks. It was terrible. I quit. Watching people in desperation. These places saying they were helping but only making it worse. Helping poor to be poorer. Employees laughing at and making fun of people when they walked out the door.

Please cover buy-now pay later trends. A huge financial literacy issue

Thank for this information. Starting to put together an emergency fund, even if you can only put away a few dollars every pay cheque, is really necessary for financial stability - it's a common piece of advice for a reason.

I feel like its so easy to just say "live below your means and have an emergency fund" if you are young and single, but not you have a family. I used to be so judgmental to people who got these loans. I never had one ounce of debt when I was single... no loans, no credit cards, I paid for my cars in cash and always had stacks in the bank. I was fine to sleep on a couch, not go to the doctor or not eat to save money, not even because I had to, but because I wanted to. Once you have a spouse and children, it's so much more complicated and often inappropriate to do some of those things for any extended period of time. Literally 100% of the time I got raises for the past 3 years, it simply matches our increased expenses. I agree, ideally you live that way, but that's just not reality for most growing families, and many people do not have help of parents or a close community. I can totally see why these loans are so attractive and often... one of the only options. I still refuse to get one, but I do not look down on those who do, because, life is hard and answers are not black and white. It just sucks that these companies prey on people in their most vulnerable states. If you want to help, lower the dang interest or extend the payment period. You KNOW the type of people who get these probably have no other option, it stinks they are being taken advantage of. So sad.

The short answer? No The long answer? NoOOooooOoOoOoooo.... Jokes aside, great video. I love how you dive into the details.

I was basically in the scenario given in this video. I didn't have covid but I had the flu all of last week. Therefore, Im only getting half my usual paycheck tomorrow. Luckily, I had been trying to start an emergency fund for the past few months. It wasnt a full 3-6month emergency fund yet but it was enough to cover for the lack of funds this time. I am able to pay my credit card bills and my part 1- rent payment for December. My motivation for obtaining a full 3 month emergency fund is definitely higher than it was before.

When I was younger, I sadly didn't have a choice. Now that I'm in a much better situation, I can look back on it with a hard-earned truth: if you don't have strong enough finances to have good credit (and cards), you likely don't have strong enough finances to pay back a payday loan *on top* of your other regular expenses. And this may be common sense but I can't stress this enough: If you have good credit but can't afford to pay back your cards *on top* of your other regular expenses, you are in the exact same boat, just in a higher tax bracket.

Honestly the government should cap pay day loans at 60% APR, if this causes many of these places to go bankrupt than maybe this isn't a business that should exist.

When I was younger and first going to college, my family and I had to immediately move out of our place. Of course, I'm helping to pay bills but only worked part-time and this unexpected move and the fees associated with it, left me in a bind. My cousin suggested getting a payday loan and out of desperation, (and ignorance), I went for it. Took another 2 rounds of payday loans, lowering the amount borrowed each time, to get me out of it. I remember after paying it off the last round: I had $20 to my name the week leading to payday and it was tempting but I was like, heck no! It's one of the sweetest feelings getting out from under that cycle. Funny enough, when I first went in to get the loan, the lady there was kind of attitude-y and borderline treated me like trash. After a year or so of paying it off, I got a call from her, all friendly, reminding me that if I ever needed money, they had funds available. 🤨 Nah, lady. Even if I did, I wouldn't be going back to you.

My parents have had to go to multiple payday loan places in a week before...since bills were constant and work was not....definitely not a good idea...exactly what you described in this video is what happened...when we couldn't pay 2-3 back on time...they referred them to collections after a bit...such a pain...and interest rates are insane!! 🤯

doesnt...doesnt your country have a logical limit on the max interest rate for private lenders and loan companies...?

This is marginally better than borrowing from a loan shark and having them break your kneecaps when you don’t pay.

Thank you very much for sharing your knowledge. You are the best!

I'm sure Paula would work more hours if that was an option. That's the thing with payday loans. No one would use them until they don't have a better option.

tattoos are badass

This is just another example on how it's expensive to be poor in this country. Once I got a good job and was having my paycheck regularly deposited into my bank account. My bank gave me a $1,000 line of credit that was interest-free for 4 months. I just pull out whatever I want from that line of credit, and they take out 25% of what I owe them every month from my bank account. The irony is that my bank only gave me this line of credit because I typically have a decent amount of money in my account anyway. So it's a line of credit that I will never use unless it's a major emergency.

my mom tried it out once - not out of desperation,just to see what it's like. needless to say, she told me more often than not, not a wise idea and if Im can just borrow from her if im ever in a bind.

Good video. 5 stars. Good job.

I got stuck in one back when i was really broke. Ended up paying on a 450 dollar loan for half a year until i gave up. They eventually sued me, ganished my wages for 1800 dollars, and left it at that. Because the amount kept collecting interest

who is this guy? where is the moustache!!

A video on Annuities would be great, how do they work and when is it a good idea. Unless yal already have a video on that. 👀

Thanks for this. We need more financial advise and education like this.

4:01 do payday loans report to the credit bureaus?

It's tough to see friends fall for these

Because of the effects of inflation and stagnant wages, I'd like to see a video that focuses on the most effective ways for most to cut expenses, and the best opportunities to add income.

I had a job interview at a payday loan company and (as I was already working full time) intentionally sabotaged my own interview about halfway through. It felt very wrong. We would be better off if Credit Card companies could offer high risk credit cards within rules that make it harder for high risk borrowers to get out of paying the debt but that still limit the interest rates that can be charged.

How can such predatory institutions even exist in the first place though? It serves no purpose other than trapping people into unserviceable debt.

Short answer, no. done. Lol

4:42 over $500+ fees? Lord who does that :/

Worst case whenever possible, get a 0% APR credit card and roll it over to the next one if you need to

When I get with them I don’t pay them back till they send a letter saying they want to do a settlement so then I get it right for the amount I borrowed

This vid does great at showing how predatory and insurmountable PDLs are, but then offer the most tone deaf, classist solutions "get a credit card, ask friends and family for a loan, have a yard sale" folks that are faced with having to go to a payday loan place dont have those options....thats the fkn problem.

All consumer credit should be taxed at 5% . To many things are bought on credit

Why would anyone take financial advise from a person who put their tattoos on a credit card and are in debt up to their proverbial eyeballs. It would be like a fat Richard Simons helping you work out.

That's scary 😰

50 cent fell as a corkscrew today for floor tile cover and it's many variations as I don't tell them what I do and they fighting in the dark, karma again I guess so plan was to take loan out from daughter for payday scheme 😭 I thought kraken agreed to pay 😭

I loved the way she said " oh crisis avoided " and then he respond " or has it just begun " 😂

Honestly my advice would be as soon as you are able to (usually 18 years old) get the first Visa Credit card. Use it as a tool to grow and keep your credit score high. Best case scenario the points and rewards can be a nice bonus from time to time, worse case scenario you may end up paying a little interest during the hard times.

nice vid

Damn this is a good business plan, I should open one!

It’s been a couple years since I’ve seen an episode of two cents, and what in the holy name of Dave Ramsey? When did Phillip shave his mustache and get a sleeve?

Its interesting to see these videos as once having been super broke, sleeping on couches, being stressed out over where your next meal is coming from and where your going to live next month. Being really broke is far, far worse than people imagine it to be. If you havent lived it, you cant understand it. Thats why I think people like to play games like ”oh they got themselves into these problems by taking stupid loans for frivolous spending! They just need to be more clever with money! They just need a budget!”, but the reality is that living as a poor person is a huge mental burden full of constant stress and depresion hanging over your shoulder. Most of us are born into poverty, as it carries over through generations. Im not poor any more, but its all really thanks to fortunate events around me that I had no control over. To think that people would start a business with a plan to capitalize on these unfortunate people is seriously sickening, these people belong in jail.

There's really only one machination where payday loans are positive expected value. As you know it takes money to make money, so if you are somehow able to generate returns on the loan greater than the interest accrued over the span of the loan, then you are freerolling.

0:48 subs say you only need Idaho, but I think that's a big ask

Very informative and educational. Gracias! 👍

I recently started seeing cashback apps like Upside and Receipt Hog on the app store, are these good ideas? Wondering if there was research out there

I've said this on other RU-vid videos but if you go to one of those place don't borrow more than $10! Or better yet, don't go at all!

The average APR being 500% is insane especially considering the typical borrowers are likely less financially educated and it’s framed as $20/$100 in 2 weeks

As someone that was stuck in a vicious cycle around 2009-2010, I can vouch for how bad they are. Right before a law change in WA, I had to keep adding lenders to the pile just to play catch up.

I like how he said "that's legal" NO JUDGEMENT. 😂💕

Here I am my parents basement studying cyber security in may have a pending $140k a year job offer with the department of defense I just got to get the required certifications they want

Very glad payday loans are regulated in Australia. They are still rip-off, don't get me wrong, but they are, by law, limited to a 20% establishment fee plus 4% fee per month (almost all lenders charge that). Answer to the title question is still almost certainly no, however. Very worth looking at alternative options - utilities in Australia will offer hardship variations (you still pay the amount, but over a longer period), and there 4% a month is much higher than credit card interest.

Can anyone say emergency fund.

Pay day loans are never a good idea. Ever. But oddly in the UK back when payday loans were first being advertised. They had APR of 4000% And then there was the problem of fraud. Anyone could walk in with a addressed letter and name and get a payday loan.

I call BS. I loaned to over 20 people and most without any interesr charge and yet, most of them still fail to repay me back on the agreed time and not even going to pay in installments

If you have to ask whether or not something is a good idea, chances are it is not.

“Woody Harralson high” huh? I’m living for this trend of wholesome RU-vid channels getting a little more edgy. I genuinely love this channel, by the way.

Two cents needs to talk about Ecosia they are a search engine that plants trees

1:45 How high did you say?

💯

Thanks you two!!!

The short answer is yes. Take the cash, don't pay it back. At worst, it goes to collections and ruins your credit.. but your credit already sucks. Ultimately, all the payday lender can do is sue you in small claims court. File a defense that you were drunk or high as you cannot remember signing anything. Small claims is a court of equity, not law, and is backed up for years. Then, when the case is coming up within 2 months, file a motion for disclosure of all their electronic records. Then go back to court a month later and file a motion to dismiss for their failure to produce their records.

The budget and emergency fund are so important to prevent this

I made this mistake in my 20s. Thank God I worked at a Company that was willing to bail me out, with no interest!!

No! Even if it means you end up in default on another loan. Default now is better than much bigger default later.

How these things are legal, is beyond me....

There no way someone will have 500 in 14 days so from the start you lose

Almost never. Payday Lenders are basically legalized loan sharks. They should only be considered as a last (legal) resort and only for absolutely essential needs.

I come from another country, when I first heard about payday loans and their rates, I was completely shocked by the fact that it's a legal business in America.

They are useful if you borrow 40% (max) of your check. So i make 1k every 2 weeks -> 400 loan.

1:56 yeah she should just open a 0% intro APR credit card

Payday loans should be called Pay more till you have no more

so, two and a half minutes in and I see some irony. The one time you would want to eat that overdraft fee lol. Might have a bit of issue with cash for the next couple of weeks though but from the sounds of it paying that overdraft fee would be much easier than paying off a payday loan. For most people this would still be tricky as they usually have fixed days for income but this can come in handy for jobs that rely on tips as you might likely have the money in the next couple of days depending on how your establishment pays out tips.

Easy money and/or quick money is NEVER cheap money.

I have lent money to friends so they could avoid going to a Payday Loans place.

In Canada your example would not work. That would violate the article 347 of the criminal code. Any loan must be under 60% annually otherwise it's a federal crime.

I miss the mustache

While I agree these loans are terrible, if they were outlawed, people would resort to loan sharks. While the interest that is charged is terrible, the payday loan store won’t break anyones legs.

They are. If you're the one lending 😅

Love you guys!

Idk man. The lady in the example for instance, would’ve become homeless without the loan. While she might regret it in the long term, in the short term it was almost certainly worth the risk for a roof over her head. And payday loans were the only people willing to “help.” She’d already exhausted all other options. If we had better social nets, she wouldn’t need the payday loan and they’d all just go out of business.

Yes don't loan them any money, better to let them learn their lesson.

I miss your musta

Wait, they're predatory because they DON'T underwrite the loans??? I've also heard that lenders are assholes FOR underwriting loans. which is it?

Why are these even legal to begin with?

Before even starting the vijayo, I'mma say "probably not". As bad as it is now, a 600% (or even the nowadays more typical for the UK ~50%) interest rate will make it infinitely worse. Hell, even your typical 20% bad loan/credit card is DEATH.

They can work, just don't do it to pay bills. I'd put it down for a sudden need to go somewhere far away and pay for it. But you don't have quite enough to cover the trip.

If one has a house they own they are not going for payday loans.

I agree it's a bad idea to take out a payday loan, but I'm also curious...are there any scenarios where taking out a payday loan is a good thing?

Man. I should become a pay day loaner 😍 ill take your money!

There is already a product for this purpose, called “credit card”. It gives you a loan which you pay back at the end of the month. Much better conditions and much more flexible than payday loans.

They can't make a dent in the loan because they require them to roll it over OR pay it ALL off. It appears many of them are trapped