Making them rich by our poor financial habits Let’s begin by examining the final part of the payday loan transaction whether it’s completed electronically or by walk in. The receiver feels like they have been saved, and they can pay their electricity bill before it goes dark at their home. Now let us go to the beginning before we go and happily sign the contract of this loan. It is vital that we analyze the root cause of why we are signing this contract in the first place. In our podcast, “What is your number MCS007” we created a budget to determine our monthly expenses minus our net monthly income. Successfully executing this activity on a consistent basis will keep us out of these types of toxic places of business. By simply not executing our budget, the owners of these types of businesses are getting rich. We are going to breakdown the structure of a payday loan, and we will understand how and why these business owners are getting rich by our poor financial habits.     Breaking down the structure of the payday loan The majority of payday loans can basically come in 2 forms. A car that is free and clear in your name can secure loans. The other form is completed by unsecured means; essentially, just by signing the contract you receive the funds without providing any collateral.  Both types of these payday loans have the same basic structure, but the essential part to pay attention to is the annual interest rate. An average payday loan annual interest rate can range from 300% to 700%. But let’s create a real world example to get a clear picture of what is occurring on a daily basis. Assuming we borrowed $500.00 and use 300% as the annual interest rate and we intend to pay back this payday loan in 30 days. The interest (profit) that this loan produces for the business is an amazing $125.00. So every day this loan is costing us $4.16. To pay off the loan on day 30, it will cost $625.00, plus processing fees, which varies.  Now these organizations will tell the public that these loans are short term, and designed to be paid back in 2 weeks; hence it’s called a payday loan. However, they are well aware that these consumer’s poor habits will make them repeat clients, and essentially get caught up in a vicious cycle of constantly taking out these loans. Now there is a reason that 12 states have completely banned these businesses from operating in their jurisdictions. Even these businesses that exclusively operate online aren’t allowed to extend payday loans to the residents of these states; this should tell you that something isn’t right!

Getting out of the cycle for good! The first step in analyzing any habit is to identify the triggers that produce the action. For example, when I smell St Louis style grilled ribs that trigger me to eat a slab of them at once, which is the next action!  By not having a budget and not knowing our monthly expense number triggers a bad habit to scramble and seek out this toxic financial action to pay for our living expenses. The Paycheck Punisher (Payday Loan) is an enemy of financial freedom that can’t co-exist under any circumstances.  So let us change our bad habit into a good habit by simply creating a budget, and allowing that to guide our spending. Finally, we can eliminate the Paycheck Punisher from our lives for good!     The post Payday Loans (AKA Paycheck Punisher!) appeared first on The Mike and Cliff Show.