The Pew Charitable Trust published a study on payday loans that is equally fascinating and scary. These are the so-called Pay Day Loans that are advertised everywhere. Once I wrote eight things that you do not know about these loans. These are the loans used by people who have bad credit or who do not have access to credit cards. That is, the most fregaos and those who scrub most.
This type of loan is an armed robbery. The conditions of them are usury, but even so, every year 12 million people spend 7,400 million dollars on them. Not in vain they promote them so much.
That does not stay that way, that swells
These people on average took eight of these loans during the year. The loans on average were for $ 375 and ended up paying $ 520 in interest for each loan. That is, they paid almost double only in interest, but the incredible thing is that they did not learn either the second or the third. No, it took them eight times.
Which means that they were willing to pay $ 4,160 extra to maintain the lifestyle they had, because the study showed that 69 percent of them took the loans to not lower their lifestyle. This makes no sense. Believe me, I do not like to lower my lifestyle either, it is one of the most difficult things one can do in life. And it is even more difficult if you have family, because in that case the whole family is affected.
Change your lifestyle, or your lifestyle changes to you
Even though I do not like to lower my lifestyle, I am not willing to pay $ 4,160 in interest alone to maintain it. This is a recipe for disaster. Once again, what makes personal finances so difficult is the personal part.
By doing this, you do not realize that when you borrow money today, you are negotiating with yourself to reduce your income for the future. In this case you are reducing the salary is more than $ 4,000 to maintain the standard of living you have.
The situation is really as stupid as it sounds, anyone can realize that. Well, anyone, except the twelve million people who do this every year. Do not fall for the foolishness of payday loans. Protect your capital, it is better to go through the discomfort of lowering your lifestyle for yourself, than to go through the trauma of your lifestyle collapsing after you paid all those interests.