Short-Term Loans Cause Long-Term Destruction

One of the great tragedies of financial illiteracy is that reality isn’t very compassionate. Not knowing the basics of personal finance can completely destroy one’s financial well being. Seemingly trivial mistakes can destroy one’s life.

Peppered throughout tens of thousands of towns and cities through the world advertise so-called “short-term loans” typically referred to as ‘payday loans‘ or ‘cash advance’ or ‘payday advances’. These loans are for extremely short-terms and are of an outrageously high interest rates, literally hundreds of times higher than many/most other types of loans.

The target group of these loans? The poor. The needy. The ignorant. They don’t offer creative services to help those who are willing to pay for timely financial assistance. No, they are there to rob them via ignorance.

Incredibly, in some situations these short-term loans are still considered to be a viable solution to a so-called short-term problem. Getting a short-term loan doesn’t solve the problems, it just converts it from short-term to long-term.

In almost all situations, it’s better to suck it up, rather than get a loan.

The loans are a debt trap, and missing a single payment jacks up the interest rate so that your chances of ever paying it off are extremely low. The purpose is to nab someone at their lowest point, put them in a situation where they are in debt, and can’t pay it off.

Short-term payday loans spell destruction for those who are the most vulnerable. It’s not enough to simply never get one of the loans, encourage others to never remotely consider the loans, but to find other ways to make money.

Rather than get the loans we should encourage consumers to put their money in an FDIC insured online savings account, learn about the 401k rollover, and other fairly basic principles of personal finance.

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