Something in our financial system that I really have to question is the payday/cash advance loan. Think about it – you never really need to take out a payday loan unless you are in a terrible financial situation, but the loan itself will put you in a way worse situation. Before you take out a bad credit payday loan or cash advance, I would highly recommend thinking it through.

The interest rates on bad credit payday loans (or any type of payday loan for that matter) is going to be more than 1000%. These loans compound so fast it’s ridiculous. If you borrow $1000, you’ll owe $2000 before your kids start school again.

I personally don’t see a lot of difference between payday loans and many other addictive behaviors like gambling and drugs. People get themselves into a terrible, vicious cycle and have no idea how to escape from it. Sometimes they’re able to pay off their payday loan but then have very little left over to shop or buy the things they need. What do they do at that point? They get another payday loan.

If you find yourself in this cycle, you’ll end up with at least 10% less money. Why? Because these loans generally cost $10 for every $100 borrowed – if you pay the loan back within about two weeks. This is extreme interest and if you don’t make your payments on time you’ll end up in a world of hurt. You’ll get charged late fees, convenience fees, and will also be charged interest again and again. These numbers don’t add up well and you can expect to stay in a weak financial position for as long as you’re using this type of loan.

These loans are often called payday loans for bad credit because people in any credit bracket can use them. I think they should be called this because they cause bad credit. They make you live on less money without personal discipline.

I would highly recommend NOT using payday loans with bad credit. If you must, make sure that you shop around well so that you can find the absolute best deal. It still won’t be a great financial decision but at least it will be the best of the worst.

I have a friend who has made a ton of money by providing no credit check payday loans. It’s been pretty interesting to talk to him about it and I thought that I could really help some people out by exposing the truth about these loans.

According to my friend, they can still make a TON of profit, even if only 50% of the people who take out the loans pay them back. This happens because of the extreme amount of fees and interest that are charged with these loans.

With payday loans, you are required to pay off the loan in full by a specified date – usually 14-30 days after you take out the loan. If you don’t, you are charged fees and the interest is recalculated. Here’s an example of how it usually goes:

Danny takes out a loan on 8/11. He pays $10 for every hundred borrowed at that time. Since Danny borrowed $500, he will owe $550 on 8/24 (fourteen days later). If he pays off the loan in full, it will be over and he won’t be charged fees. However, if he doesn’t pay the loan off in full by that date, he will be charged a fee and another round of interest. His fee will probably be about $20 and the interest will be another $10 per every $100 that he owes. That means on 8/25, Danny will owe $570 + $57, which is $627. Keep in mind that this is after two weeks.

On 9/7, Danny will owe $647 + $64.70, which is $711.70.

On 9/21, Danny will owe $731.70 + $73.17, which is $804.87.

On 10/5, Danny will owe $824.87 + $82.49, which is $907.36.

On 10/19, Danny will owe $927.36 + $92.74, which is $1020.10.

See how ridiculous this is? These companies that are trying to sell you on taking a no credit payday loan are making money like bandits while you are paying everything you make just to get out of the loan. In this situation, Danny would probably resort to taking out a second payday loan from another company just so that he can stop the insane interest and fees on his current one.

These companies are able to stay in business despite the terrible rate of loan completion simply because they charge insane, ridiculous, near-criminal fees. I personally was very disappointed that my friend was running this type of business. I understand that in some situations these loans can help people but I’d dare say that most of the time people are getting in way over their heads. This behavior becomes addictive and it creates a situation that people have a really hard time getting out of.

If you decide to take out no credit payday loans, at least take the time to shop around for the best deal. Look at a lot of lenders and compare the details, fees, and rates.