Today’s struggling economy has had a huge impact on personal finances around the world. People are having a tough time figuring out how to pay their bills, pay off their accumulated debt, and maintain a stable financial situation for themselves.

Now more than ever, banks are declining loans (something they should have done a lot earlier), and there’s no doubt as to the difficulty this can cause for many people looking for immediate money.

That’s where short-term payday loan companies come into the picture. The advertisements say how easy and convenient it is for anyone to get a loan. It looks simple, right? Well that simplicity comes with a hefty price tag and in the long run, isn’t worth it at all.

Short-Term Payday Loans, 101

Payday loans generally mean that you can get a loan equaling your paycheck in advance of receiving your paycheck from your employer. You may have bills due by the end of the current week, but you won’t be getting your paycheck from your place of employment until next week.

For example, let’s say Sue has $200 worth of bills, but only has $100 until her next paycheck. She could get a short-term payday loan from a short-term loan company. They would give her the money, but then would suck the funds out of her next paycheck automatically.

You may be tempted to turn to these short-term payday loans figuring “I’ll have the money next week anyway, so I’ll just use that to pay the loan right back”. So, you may think that a payday loan is a harmless, easy, and quick fix to your immediate problem.

Don’t! These short-term loans are essentially a money making scam where you could end up paying more than two or even three times the amount of money you borrowed.

The High Interest Isn’t In Your Best Interest

First of all, the interest on these loans is usually incredibly high to begin with. To a lot of people who are not detail oriented, this fact slips by them and when it comes time to pay back the loan they are shocked to see how much more they owe. If they try to argue, it’s going to be to no avail, since they signed the papers saying they agreed to the terms and conditions and have no right to argue in the first place.

What happens then is the person can only pay back a portion of the loan. If they’re thinking “well, that’s okay…I’ll just pay back the rest next month.” Bad idea. The next thing you know, their interest rate has increased exponentially and they owe twice what you took out.

What kind of sensible “deal” is that? That’s when they realize that there’s no way that amount can be paid off in a short period of time. And the longer that loan hangs around, the more and more money they end up paying on interest alone. It’s a no win situation.

Legalized Extortion

Finally, the most basic and simple argument that can be made as to why anyone shouldn’t take out these payday loans comes down to the notion that these loans are basically legalized extortion.

These payday loan companies rely on the vulnerability of people and their need for financial assistance. They are more than cordial and polite when “assisting” you with your loan, but give it no time at all, and they become aggressive and pushy to no end.

Like a wolf in sheep’s clothing, they’ll lure you into thinking their on your side until they have your signature. That’s when they have you cornered and they won’t back away. When a company takes advantage of unknowing or desperate people, it’s simply another form of extortion using legalized business practices.

Be wise, be patient, and most of all, don’t be a sucker. Stay away from any payday loan companies and approach your financial situation with alternatives that make better sense. If you need to, try to make money online. I even set up a website explaining how to make money online.