What’s a payday loan and why is it hated

Question

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

Answer 1

The basic idea is that people who are desperate for money will take out a short-term loan from a company where they charge a lot of interest, so that they can have money before their next payday. The trick is that these companies who provide payday loans know that the poor people who need their services are desperate, and can charge lots and lots of money.

Let’s say that you need to borrow $500. When all the fees that they add have been put into the loan, you now might end up owing $1,000 total that you’re paying off slowly over time. Which is incredibly harsh for people who are struggling and poor, the sort of people who need these loans in the first place.