Payday lenders get a bad rep. But is it all that justified?

Often on this blog, I talk about how payday loans are one of the options you can consider when you find yourself in a financial pinch. I talk about these things because some readers find themselves in desperate situations where they need financial help to tide them over, even after they’ve taken steps to help their dire circumstances.

For example, more and more people are choosing to shop online, because they feel it is an easier way to find deals and offers, which can be a huge boon to their wallets during the festive season. In fact, payday lender SwiftMoney did a survey, which revealed that 32% of people actually try to save money by shopping online where items can be found cheaper.

But what happens come Christmas time and simply looking for great deals isn’t enough? Perhaps, you’re still unable to fit the present buying within your budget even after all those savings. Sometimes, getting a temporary loan which can be paid back the following month is one way to fight the Christmas money stress (after all, who wants Christmas to be about stress?)

Don’t get me wrong – I’m not biased towards payday lenders. In fact, I’d never suggest this as a permanent option. I’d also always encourage one to explore options such as borrowing from friends and family first (whatever the embarrassment may be.)

Still, many readers feel uneasy turning to payday loans as an option. They often write in after reading some nasty stuff about the payday loan industry, saying “Wow, the interest rates are so high!” or “Pay day lenders are just out to get my money!”

So yeah, payday lenders get a bad rep. In this article, I talk about a couple of reasons why payday lenders seem so dubious, and what a new generation of payday lenders is doing about it.

Let’s dive in!

Unreasonable terms

The first complaint many people have about pay day lenders is the “unreasonable terms” that many lenders impose. For example, payday lenders typically require repayments within two weeks. In addition, if you’re not able to pay on time, they could slap you with a whopping 17.5% of interest!

What people miss is that they’re comparing payday lenders to banks and credit card companies. While these creditors impose lower interest rates, bear in mind that they’re usually not as willing to lend to you in a time of need.

If you have less than stellar credit, or need money by the following day – then good luck trying to convince a bank or credit card company to lend that to you.

Let’s compare apples to apples, people!

Lack of transparency

Another issue that some people report (although I’d say this is a minority) is that they weren’t aware of the steep interest rates before they started borrowing. As with any industry, there are bound to be bad eggs in the bunch that employ shady tactics when promoting their products.

Regulation is moving to stamp this lack of transparency out in a big way. So I believe that we’ll see transparency issues slowly disappear.

A new generation of payday lenders

Thankfully for us, payday lenders are constantly seeking to improve themselves and become more transparent in their lending terms and processes. These days, payday lenders are using technology and tools to help them be more transparent.

For example, I really like this slider on the homepage for SwiftMoney – it’s a super easy way for you to see how much you’ll actually have to pay back given the amount you borrow. While this may seem like a trivial example, I think it speaks volumes for what payday lenders are trying to do to help their clients make informed decisions.


The truth about payday lenders is this – yes, they charge high interest rates. Yes, they need you to repay your loan in a short time frame. But they have a strong track record of saving people’s behinds. Look in the comments section of this article.

So yeah, I believe the bad rep is unjustified.

Listen, the only way payday loans can be of benefit to you is if you understand their purpose. Payday loans are a stop gap – a financial bridge to help you during financial emergencies. You have to be 100% sure that you can pay those loans back when you get your next paycheck.

Once you understand that, I believe your expectations of payday loans and the terms they impose will be put in better perspective.

Again, I’d reiterate that you should always look to borrowing from friends and family as your first port of call. As always, be wise with your financial decisions, and that’ll make all the difference.