The Brutal Truth about Payday Loans


by Jim Moriones, |

There are pros and cons to just about everything in life. No matter what business you are in, there are bound to be individuals who do not believe in what your business stands for. Even though that is something people have grown to accept, it does not make it any easier for business or consumers. The payday loan industry does not have a lengthy history, but it does have a promising future. But as with anything, there are two sides to every story, and pros and cons of each side.

There is certainly no right or wrong answer even though some might believe so. The most important factor in regards to payday loans is education. Educating yourself on what seems like an end to a dire situation to what ends up being a sea of debt. Asking the questions and getting the facts is the key to understanding the growing potential and need for payday loans.

What Is a Payday Loan?

A payday loan is quite a bit different from a loan in which you walk into a bank, sit down with a banker and apply for financing. A payday loan is typically a small amount of money that can be borrowed with a very high-interest rate. The individual receiving the loan must prove employment and sign documentation stating that the loan will be paid back when they receive their next paycheck. These are sometimes called “cash advances” or “short-term loans” but in essence they are all the same. The lender will have access to the customer’s checking account information so if they do not pay or if funds are not available, they can take matters into their own hands.

More often than not, payday loans need to be paid off in one lump sum payment. Occasionally you will find a lender who stretches the amount over several pay periods. But these are typically lenders that offer much larger amounts. Payday loans in the UK are typically no more than £500 but with an annual percentage rate of 1,000% or more. For every £100 that is borrowed, £25 will be added on as interest.

Pros and Cons of Payday Loans

After learning more about how payday loans work and how much interest is charged per payday loan, you may be thinking that there are no pros to obtaining a payday loan. While this type of thinking is justified, it is not necessarily the case. When used responsibly, payday loans have the ability to help the individuals who truly need it most.

One of the biggest pros to getting a payday loan is that is easy to qualify for. You typically only need to prove the following:

  • Identity
  • Proof of Income
  • That you have an active bank account

If you can prove you are who say you are, are currently employed, and have a bank account, you have about a 98% chances of getting approved. While this definitely is a pro to obtaining a payday loan, it can also be a con. With this kind of acceptance rate just about anyone can apply and be approved. Even people who do not necessarily need these types of short-term loans and use them for other purposes other than financial emergencies. What lenders must also keep in mind is that just because you are able to prove all of those things, does not mean you are a reliable person and actually intend to pay back the loan in which you have borrowed.

Another pro to obtaining a payday loan is that is it very convenient. In most cases, you never have to leave the comfort of your flat. Many people who receive payday loans apply from their mobile phones or via the internet. Consumers like this about payday loans as it saves them the hassle and embarrassment of having to physically go to the place of business to receive their loan. But with every pro, there is a con. And this is another benefit to payday loans that can also be a detriment.

Convenience is a good thing when it comes to consumers and also a good thing when it comes to criminals. This leaves lenders in a very vulnerable position and leaves them open to individuals who may have no intention of ever paying the money back. It is sad but very true.

Use Payday Loans Responsibly

In the case of payday loans, it often times depends on the type of person who is receiving the loan as to how they will actually handle the situation. When used responsibly, payday loans can be a solution to an unexpected emergency or other dire situation. If you receive a payday loan, pay it back, and move on with your life, then that is the right way to handle the situation. Unfortunately, there are individuals who receive payday loans, go to another establish to pay off that loan, and it becomes a never ending cycle of debt and despair.

If you choose to obtain a payday loan, be responsible for it and do not let it overcome you. They are there to help you, not to make your situation worse. If you have a steady income and are responsible when it comes to paying your bills, it should not be a problem. If you keep that in mind, you have truly nothing to worry about.


Payday loans benefit a lot of people and help them out of unpredictable situations. While they do get individuals out of many emergencies, the interest rates are just too high to play around with. If you are able to find other means to help you with your finances, then most would say that is the better choice. However, short-term loans are sometimes the only option for you but do not allow yourself to be taken advantage. Nor allow yourself to fall into the payday loan cycle in which you may never be able to get out of.  Proceed with caution.