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8 Payday Loan Horror Stories You Won’t Believe Are Legal

May 20, 2025 By Teri Monroe Leave a Comment

payday loans
Image Source: Pexels

Payday loans are short-term, high-interest loans typically meant to be repaid on your next payday. If you’ve ever needed a payday loan, you probably know that some of their practices are predatory. Still, 12 million Americans take out payday loans annually. These loans often take advantage of individuals who are in a financial pinch and need money fast. Interest rates are astronomical, and missed payments can lead to financial ruin. So, it’s not surprising that there are many horror stories out there. Here are eight stories that we couldn’t believe are even legal.

1. College Student Misses 500% APR

One college student took out a $100 loan to pay for essentials during finals week. Unfortunately, the APR on the loan was 500%. The student didn’t read the terms of the loan. Payment was missed by one day, and the student owed $500 plus a $50 late fee.

2. Teacher Goes into Debt

According to NBC, one day, Jennifer Williams borrowed $200. Years later, she was still struggling to escape debt that she called “quicksand.” It took her 6 years to pay off her payday loan debt. She did this with the help of a local bank that offered financial literacy classes. At the end of the classes, she was offered a low-interest loan to pay off her debt.

3. Six Loans at a Time

Sandra Harris was in a tough time, and she turned to payday lending. After several rollovers, Sandra’s first loan was due in full. She couldn’t pay it off, so she took a loan from a second lender. Sandra eventually found herself with six simultaneous payday loans. She owed over $600 per month in fees alone, which wasn’t applied to her debt. Sandra was evicted, and her car was repossessed.

4. Single Mother Struggles

Lisa Engelkins, a single mother making less than $8 an hour, paid $1254 in fees to renew a payday loan 35 times. Lisa thought she was getting new money each time. In reality, she was only borrowing back the $300 she had just repaid. She paid renewal fees every two weeks for 17 months to float a $300 loan, without paying down the loan.

5. Payday Loan to Afford Medication

Meka Armstrong has struggled in a cycle of debt from payday loans for years. She first took out a payday loan in 2010 to cover the costs of medication she needed for her lupus. Meka said it is the worst decision she has ever made. She said that payday lenders even threatened to sue her and threatened her with jail time for nonpayment. Lenders also have customer’s bank account information.

6. Lying about What is Owed

One individual who took out a payday loan said, “I took out a $1500 loan, wrote two checks for $918. I have paid over $3000 on this. I asked what I need to pay to pay it off, and I was told the check amounts. Went to pay one off and would come back to pay down the other. I was told I had to pay $1300. I don’t have another $400 to add.” The worst part is that lenders can garnish your wages if you are behind on payments.

7. Repayment is Not Considered

Most payday lenders don’t consider whether you can feasibly pay back the loan. In fact, they don’t want you to be able to comfortably afford payments. Then, they make more money. Ed got stuck in this cycle. Ed said he’d been borrowing from various payday lenders for a number of years, and now his monthly repayments were often more than he was earning. He said that he’d complained to the lender about the 50 loans he’d taken out with them, but they said all the loans had been offered responsibly.

8. Communication Isn’t Clear

One individual in Oregon shared their experience with poor lender communication. They said, “I obtained a $300 loan from this company via Money Mutual. Since that time, I have paid a total of $1,295 for a $300 loan. I have no access to my records on their website, and no one at the company will speak to me, yet they continue to debit my account every other week.”

Avoiding Payday Loans

Ultimately, any other kind of loan is better than a payday loan. If you have bad credit, ask a family member or friend for help or see if you qualify for any kind of assistance. You don’t want to get caught in the payday loan debt cycle.

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Teri Monroe Headshot
Teri Monroe

Teri Monroe started her career in communications working for local government and nonprofits. Today, she is a freelance finance and lifestyle writer and small business owner. In her spare time, she loves golfing with her husband, taking her dog Milo on long walks, and playing pickleball with friends.

Filed Under: Debt Reduction Tagged With: payday loan horror stories, payday loan trap, payday loans

Do Payday Loans Affect Your Credit?

August 9, 2021 By MelissaB Leave a Comment

Payday Loans' Effect on Credit

If you’re in a tight spot financially, payday loans can be attractive, especially if you have bad credit and have few other resources. A payday loan is usually for a small amount (less than $500), and you need to pay it back in two to four weeks. Even better for many is that payday loan companies don’t check your credit. Any individual is eligible for a payday loan. However, payday loans charge an exorbitant interest rate, and if you’re not able to pay the loan back in time, you can find yourself trapped in a negative payday loan cycle. This happens if you must continue to borrow money to pay what you already owe and what continues to grow because of the interest rates. When you get to this point, you may be concerned about payday loans’ effect on credit.

Payday Loans’ Effect on Credit

How payday loans affect your credit depends on whether you pay them off on time or if you default on them.

If You Pay Them On Time

If you pay your payday loans off on time, the loans have no effect on your credit. That means they won’t negatively affect your credit, but they also won’t do anything to improve your credit.

If you’re looking for methods to improve your credit, rather than payday loans, look to a secured debit card. Most people can qualify for a secured debit card even if they have bad credit.

If You Default on a Payday Loan

If you default on a payday loan, then your credit may be affected. Often, in this case, a payday lender will give your information to a debt collector. When this happens, the loan will appear on your credit report, and it will negatively affect your credit score.

Keep in mind, the payday loan will stay on your credit report for six years. Even if you work hard to improve your credit for three years after you defaulted on a payday loan, a bank may not want to lend you money for a car loan or a mortgage. If the lender sees payday loans on your credit report, those are red flags to the lender.

If You’re Taken to Court

Payday Loans' Effect on Credit
Some payday lenders may choose to take you to court if you default on payments. If you lose the case, once again, this appears on your credit report and will negatively affect your credit score for six years.

Final Thoughts

Before you take out this type of loan, be aware of payday loans’ effect on credit. A payday loan, even one that is paid on time, will not boost your credit score because the payday loan company doesn’t report it to the credit bureau. However, if you default or the payday lender must take you to court to get payment, then the payday loans can negatively affect your credit score for six years. If there is any other option to tide you over until the next payday, use that option rather than taking out a payday loan. For many borrowers, payday loans are traps that continue to spiral out of control months after you take out the original payday loan.

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MelissaB
MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

Filed Under: Credit Score, loans Tagged With: Credit Score, payday loans

Options When Consolidating Payday Loans

July 5, 2021 By MelissaB Leave a Comment

Payday Loans Consolidation Options

Payday loans can trap borrowers in a vicious cycle. Because you’re short on cash and/or have bad credit, you borrow money from a payday lender. That money is usually due back in a short amount of time (often just two weeks). Yet, because of high fees and interest rates on the loan, you must pay back much more than you originally borrowed. If you’re unable to repay the loan in time, you can always roll the amount over into a new loan. This is how the payday loan trap begins. However, you can avoid or escape the payday loan trip by utilizing payday loans consolidation options.

Options When Consolidating Payday Loans

You don’t have to stay stuck in the payday loan trap. Instead, utilize these options to consolidate your payday loans.

Get a 0% APR Credit Card

If you still have good credit, consider applying for a 0% APR credit card. These types of credit cards will allow you to transfer your payday loan balance onto the credit card. Most of these types of cards charge a transfer fee of three to five percent. Then, you have twelve to eighteen months of 0% APR, which means every payment you make goes on the balance, allowing you to pay it off more quickly. After the introductory APR expires, you will pay the stated interest rate on the rest of your balance.

Get a PALs Loan

Another option offered by certain federal credit unions around the country is Payday Alternative Loans. These loans are available for $200 to $1,000 and are to be paid back in full in one to six months.

To qualify for a PALs loan, you must be a member of the credit union for at least one month. The credit union is especially interested in your income rather than your credit score, making these loans easier to qualify for than a 0% APR credit card. In addition, these loans can help build and improve your credit score.

Borrow from Friends or Family

Payday Loans Consolidation Options
Photo by Rajiv Perera on Unsplash

If you don’t qualify for either option already stated, consider borrowing from friends or family. However, if you choose this option, recognize that borrowing money can often ruin relationships. To keep this from happening, write out a contract stating how much you’re borrowing and when you will pay it back. For good faith, state how much you will pay weekly or monthly. If you want, you could even offer to pay back the loan with a bit of interest.

Then, dedicate yourself to paying off this loan as quickly as possible. Nothing ruins a relationship faster than someone who doesn’t pay back a loan to a family member or friend.

Final Thoughts

Payday loans seem like an easy, quick way to borrow money, but they can trap you in an endless cycle of debt. To break that cycle, utilize one of these payday loans consolidation options so you can stop paying so much in interest and pay off what you owe.

Read More

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MelissaB
MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

Filed Under: Debt Reduction, Financial Mistakes, loans Tagged With: debt consolidation, debt consolidation loan, payday loans

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