Payday loans are such a bad idea for consumers but they are a great idea for lenders. There are a number of risks that come with payday loans that revolve around the reason for the loan. If a consumer needs a payday loan they are probably not able to get a regular loan because of bad credit. The payday loan is often for everyday expenses that will come up again in a few weeks. Payday loans are short term, small loans that have hefty fees. That is money that could be better spent.

People who use payday loans tend to be repeat customers. Once they start borrowing on this manner they tend to get into a habit of using same day cash loans as quick cash. The problem is that they never get ahead. A loan needs to be repaid with interest. It is better to learn to do without for a while and save for things than to continue paying too much for a small loan. Continuously using payday loans is a dangerous way to get into a debt trap that will be nearly impossible to get back out of on your own. Most people end up paying large settlements or using debt consolidation to get out of payday loan debt.

Bad money management habits result in poor credit scores that make regular loans inaccessible. Resorting to same day cash loans does not improve a person's credit score. They will actually be a red flag to lenders that this consumer has difficulty managing money.

Living paycheck to paycheck is difficult. Life is full of unexpected problems. Having a savings account to cover these problems gives peace of mind and a sense of security. Borrowing on a payday loan just digs a deeper hole. The loan has to cover the unexpected expense and then almost 30% on top of that for fees and interest. It may not sound like much unless one considers that the average minimum wage paycheck is less than $300 a week. With that low an income every penny counts.