I know what loans are but what makes them so much worse?
Edit: thank you everyone for Answering! I think I got it now 🙂
In: 32
Payday loan companies have been referred to as legal loan sharking.
Payday loans are shot term loans, the idea being that you can borrow money to hold you over until your next payday when you can pay it off, hence the name.
They have a bad reputation because payday loans are predatory. They focus on people in financial trouble with poor credit and have very high interest often over 100% annually. They are meant to prey on people with bad finances and/or have poor financial management skills who are very likely to be unable to pay the loans back or don’t understand what they are getting themselves into.
Failure to pay back such a high interest loan will result in a debt spiral that’s very hard to get out of. You have to keep re-borrowing money from them just to pay off the interest.
My former boss used to work for one of these companies and mentioned the slogan used by management was ‘forever in debt’ because that’s what they are aiming for with their clientele…
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