Image from
Image from


Payday loans are instant solutions to money problems. But in reality, does it really serve its purpose well? Many who avail for these offers often find themselves in a roller coaster ride where they end up applying for a new loan to pay off the debt they can’t afford to repay. And this trend has been observed for many years now. And according to critics, lenders make money by offering loans to individuals who can’t afford to pay back.

A study conducted by the Center for Responsible Lending showed that 76% of payday loans borrowers share the same loan purpose and that is to pay their old loans. However, despite this reality, loan providers deny the fact that they are trapping borrowers in a cycle of debt as they continue to offer high interest loans ranging from 391% to 521%.

“Most payday loans customers borrow money to default or roll over. Only few individuals make loan repayments in cash or during their due date”, wrote Hilary Miller; chairman of Consumer Credit Research Foundation. She is one of those who are fighting against today’s loan regulations.

Roll-over; a term used when taking out loan to pay back the old one is very common for many years now. “Lending institutions term payday loans as “short term quick fix”. However, this often results to borrowers being trapped on a high cost debt for a long period of time”, said Ellen Harnick from the Center of Responsible Lending.

A CFPB report showed that out of 5 payday loans, four are rolled over. In fact, only 15% of borrowers manage to pay their debt on time. According to Nick Bourke from Pew Charitable Trusts, a typical borrower will not repay one’s loan on time. However, they roll over, renew or apply for another at frequent intervals for a long period of time. Borrowers are lured into unaffordable loans to fill in their short term lack of cash. “This is the payday loan’s core business model”, Bourke stated. “For a fair minded and objective reviewer, this is not in question”, he added.

If you look at payday loan at a bigger picture, this can be viewed as a debt trap. However, one cannot discount the fact that it has helped people who are in an urgent need for cash as well. Hence, one cannot point fingers to the lenders alone but there is an urgent call for everyone to be responsible borrowers at the same time.