Most people know that taking out payday loans are not exactly the best financial strategy but there are many reasons why consumers should avoid them altogether.

Here are a few of those reasons.

Payday loans have been getting a lot of flak lately, mostly based on their relationships to the predatory lending practices that used to promulgate the financial industry over the past decade or so. While payday loans do, perhaps, provide some kind of benefit on an extremely short term basis most financial counsels are likely to advise against them completely.

According to the Community Financial Services Association of America, there are nearly 21,000 such storefronts across the United States; that is more offices than there are McDonald’s restaurants (which actually has been tallied at a measly 13,000 in comparison, according to

These numbers are probably alarming to most people, and they rightly should be, especially when you consider how quickly these loans can result in problems for vulnerable consumers. Theodore W. Connolly, author of the The Road Out of Debt says:

A payday loan can be approved within a matter of hours and there is typically no credit check. Usually, you write a personal check payable to the payday lender for the amount you wish to borrow plus a fee. The check is dated for your next payday or another agreeable date within the next couple of weeks when you figure you’ll be able to repay the loan.

While this sounds well and good, there are a number of things that can go wrong, and many stipulations that first-time payday loan customers should know about.

1. First of all, payday loans are extremely expensive. For example, a high-rate credit card might have an interest rate near 30 percent. A payday loan, however, will probably have an interest rate that is up to 10 times higher than that! This means that a $100 payday loan could actually end up costing you more in the long run.

2. Secondly many payday loan customers can end up in a vicious cycle. Now, the more reputable short-term/emergency/payday loan facilities take careful measures to ensure this cannot happen by keeping a database of customers so they know who has already borrowed, but there are some operations that will continue to let you borrow or “rollover” your old balance (into a new loan which compounds the already high interest rate).

3. Third, the high interest rates will increase your debt liability at an alarming rate. Connolly says that by the time you finally pay off your loan,

You will most likely end up paying [up to] 10 times the amount you originally borrowed.

4. Fourth, payday loans are much easier to get than traditional lines of credit. This makes them extremely dangerous as careless or ignorant consumers might be approved for one before they can even reconsider the repercussions of such a decision. Since they have no recession right, you cannot retract your application once it is approved.

5. Fifth, a good amount of payday lenders will require access to your bank account. Extracting your payment from your own account automatically might seem like a good idea until you realize how much it is going to be; too bad you won’t be able to stop it once they have signed you up.

6. Finally, payday lenders will probably not work with you as cooperatively as traditional creditors. When the day comes to call in your loan, if you cannot afford it the loan company might make your life somewhat difficult.

While the Fair Debt Collection Practices Act will protect you from harassment and threats, this will still not be an easy or enjoyable process.