A profile of the bad credit payday loan

Thinking of taking a bad credit payday loan? Read on and see why you should think twice about this option.

Don and Sally have spent their entire marriage, 22 years, living in a trailer park. They were able to buy the trailer from a life insurance payoff when Don's mother passed away. There they raised two boys, a girl and the family dog. Sally hasn't been able to work for ten years due to a broken back, and isn't eligible for disability benefits because she is not a U.S. citizen. Don is a citizen, but did not take advantage of his youth, dropping out of school in the seventh grade, and spending most of his life working odd jobs, with a couple of long term jobs that lasted long enough for him to get credit, but not long enough for him to pay off his bills. His credit rating now excludes him from most conventional credit loans. But like most people, Don would one day need a loan in order for Sally to survive.

Now, Don has a job as a janitor but he barely meets his expenses. Last month, Sally's blood pressure went through the roof. The free clinic doctor prescribed medication that he insisted she take immediately if she wanted to live longer than a week. Having no emergency funds, Don asked his brother for a loan, but his brother was broke, although he expected to have $500 free in a couple of weeks when he would be paid. His brother advised Don to apply for a bad credit payday loan.

There was only one place in town that would make a bad credit payday loan. Don's brother drove both Sally and Don to this business and they all went inside. The interview went quickly, Don presenting identification and a recent pay stub. A quick call to verify his employment and length of employment was all that was needed before Don was approved for a $400 loan. The total fees on this loan was 30%, or $120, to be paid within fifteen days. With a bi-monthly check of only $600, Don would have only $80 after repaying the total of $520. He had planned to pay his rent with that money. No problem, his brother assured him. He'd have money by the time his rent was due. He'd cover him and Don could repay him, interest free, at a rate of $50 a month. Don figured he could cut back on the beer.

Don happily signed the agreement for his bad credit payday loan. To assure payment, the loan company took a post-dated check for the loan and fees. Don was ecstatic when they counted out four one hundred dollar bills into his hand. Don's brother drove Don and Sally to the pharmacy, the medications were purchased, and by week's end Sally had recovered.

“The fees were extreme,” Don says, “but it's worth it to see Sally well again.”

Don has heard that a movement is currently underway to limit the bad credit payday loan industry by capping interest rates. He worries that this limitation may ultimately close the doors of the industry, and he doesn't approve.

“What most people don't understand,” he explains, “is that no one else was willing to make that life-saving loan.” He feels that, as long as these businesses perform their collections ethically and according to the law, they should be able to charge whatever fees they want.

Competition is the surest way of keeping high risk, personal loan fees at decent rates. The government provides these businesses with incentives to curtail high fees to help both the businesses and and the nation's poor. The word to the wise consumer: take out such a loan only when you must. Shop around on the Internet and don't expect too much. After all, the operative words are “bad credit” here.

Fix your credit if you can, and if you can't, there's still a bad credit payday loan to help you through the storm.