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Stop Endorsing Payday Loan Companies on Personal Finance Blogs

By Erik Folgate

Whenever I am surfing other personal finance web sites, I sometimes glance at the advertisers that sponsor their site. Many times, I see that payday loan companies are paying for their own banner or link on personal financial websites that I believe would not normally advocate someone to get a loan from a payday loan company. So, why are bloggers still earning advertising money off of payday loan companies? I understand that many of you are producing a high quality informational product. I am always amazed at some of the knowledge and expertise that is out there when it comes to the world of personal financial blogging, however, I think bloggers have a personal and professional responsibility not to be hypocritical when it comes to the products and companies we endorse.

You cannot argue that using a payday loan is ever a good idea for someone trying to become wealthy or win with money. Payday loan companies prey on the weak and poor people in our society. Did you ever notice that those shady looking payday loan offices always seem to be in the bad parts of town and never the richer parts of town? The fact is that rich people don’t use them, and neither do middle class citizens. You cannot argue that they are offering a legitimate service to “get someone out of a jam”. Many of us complain about the horrible APR interest rates for credit cards, because they can range somewhere between 15% – 35% annually. Payday loan APR interest rates can range anywhere from 400% to 800%!! These are predatory lending practices, and they get away with it because their target customer base is those who are in a desperate need or too uneducated to realize the decison they are making.

I am not here to tell anyone how to run their blog, but I urge you to consider the ramifications of endorsing products and services that you would not use yourself. Be consistent with what you teach, and your readers will respect you more for it. I may have Google payday loan ads pop up around this post, but that is only because I don’t know how to filter out that stuff in Google Adsense yet! So, I am sorry if this post already looks hypocritical, but sometimes even Google isn’t smart enough to sense that I am talking negative about payday loans.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • John

    First of all, it sure sounds to me like you *are* telling people how to run their blog. Maybe some people think differently from you. Are they not entitled to write about their thoughts on the subject?

    You’re making far too many assumptions here, the least of which is not that there is never an appropriate time to take a short term loan. Granted that a payday loan is not the most ideal way to get money, but isn’t it better than losing your job because you can’t get your car out of the shop? Would you rather pay a $25 premium on a $100 loan if the alternative was having your power shut off and having your kids sleep in the cold? You call the practices of the industry “predatory” but fail to realize that for some people, it doesn’t matter if it is the best option, or a ‘smart’ option, it’s the only option. What if your dog is dying and you need $500 to save it’s life. Your friends don’t have it. Your family doesn’t have it. Are you going to run to the Wachovia down the street and ask for a $500 loan? Are you going to find anyone else to lend to you with a credit score in the 300’s? Are you going to let your dog die? Are you going to throw your arms up and say “I should have had an emergency fund?” All of the sudden spending $600 to repay a $500 debt doesn’t sound so bad. That’s not even to mention the substantial risk that a lender takes on by loaning money without checking credit. If banks had the same default rate things would be a lot different.

    As many people do, you insist on expressing the fee in terms of APR, which is great for shock value, but far from accurate. A payday loan is a short term loan not revolving credit. It is not meant to be treated as revolving credit and the industry makes considerable efforts to deter people from using payday loans as revolving credit. A payday loan is meant for people to borrow only what they need and only as much as they can pay back on their *next* paycheck. The term for a payday loan is meant to be no more than 4 weeks with the majority being either a 1-week or 2-week term. If we want to discuss predatory fees in terms of APR let’s call up Capital One and ask them what the APR is on a $26 late fee (on a $100 balance that’s over 600% APR).

    I wouldn’t assume either that just because somebody is reading a personal finance blog that they are already wealthy. Many people, myself included, read personal finance blogs because they are trying to *become* wealthy, not because they already are. I look to personal finance blogs for advice on money matters and if I were seeking advice on whether to take out a payday loan I would hope to get somebody’s unabashed opinion on the subject, regardless of whether another blogger thought they were advocating a bad product. Isn’t that what blogging is about after all?

    Last, but certainly not least, I find it preposterous that anyone would feel it’s their place to tell somebody what to do with their money (or their blog for that matter). Who is anyone to tell someone else what is or is not wise, how to spend their money, where their priorities should lie, or judge them for how they spend their own money. Life is full of tough decisions and with any luck none of us would ever have to chose between losing a job, losing a pet or having our kids sleep in the cold and taking out a payday loan but in the real world this happens everyday. If the payday loan industry did not exist people who are faced with tough decisions would instead be faced with no options at all, which is far worse. I for one will never judge somebody for making that call, no matter the APR.

  • http://calimckoys.blogspot.com tanyetta

    Ouch! My momma always said: If someone starts a sentence off with: “First of all”–tune the rest of the conversation out. LOL

    Ok that wasn’t funny. Geez, it’s your blog, say what you want.

    P.S. I know people who have been personally ruined by payday loans. It’s a sad sad situation especially when they could’ve gone on base to Navy Relief for assistance. I’m not a financial savvy person at all. I am still trying to figure out how to make a dollar out of 15 cents. :)

  • Jacob

    John – Feel strongly about the subject do you? :) I doubt that he’d disagree with your stance that it is necessary in certain emergency situations. I’d have to agree with most of what he says though, they do prey on those who need to preyed on the least :P

  • erik.folgate

    The purpose of this post is to challenge personal financial bloggers to endorse only those products and services that they would use themselves. I am pretty confident that very few of the PF blogs that I read would endorse the product to their readers, yet they have a link for a payday loan service, because the payday loan company pays them per month to have that link on their site. Again, I am in no way against monetizing a blog, but I think that anyone who is being paid for advertisements should somewhat agree to that product or service being used.

    John, I disagree with about 95% of what you said. But that’s okay, I encourage people to express their opinions about what I write. That is the beauty of blogging, it facilitates discussion about topics that are most important to us. Your argument that I shouldn’t be telling people what to do or how to handle their finances is confusing to me. Basically, what you are saying is that people shouldn’t give each other advice, we shouldn’t learn from each other’s mistakes, and NO financial decision is a bad one. I’m sorry, but if my best friend is going to finance a $30,000 car when they make $30,000 a year, I’m going to tell them that I think they are making a mistake. They don’t have to listen to me, but that isn’t going to stop me from expressing my opinion to them out of caring for their financial and emotional well-being. In the same way, I write for this blog, because I want to help people NOT make the same mistakes that I made in college. I want to start a revolution of people that start thinking differently about money and debt.

    Anyone can read this blog and form their own opinions based on my opinions and ideas. I don’t expect everyone to agree with me, but I certainly think that learning from each other, giving each other advice, and keeping each other accountable for the decisions we make is a socially responsible thing to do. If someone I knew starting using cocaine, I wouldn’t say, “oh well, who am I to judge them, I just won’t say anything to them.” If I care about them enough, I’m going to say and do whatever it takes to try and help them stop using drugs, because drugs destroy lives.

    In the same way, I believe that bad financial decisions can ruin people’s lives. Money issues can destroy relationships, cause a divorce, make people greedy, and put people in jail if used improperly in an extreme way. So, I take this stuff fairly seriously, and I would NEVER condone someone to take a payday loan, because MANY times it does turn into revolving debt. Think about it, if you’re struggling to make ends meat, and they take the loan out of your next paycheck, how are you going to cover your expenses out of that smaller paycheck if you couldn’t do it with your normal paycheck?

    If someone was in a huge bind and they needed cash QUICKLY for saving a pet, paying a necessity bill, or paying for a health care bill, I would advise them to do all of these things before going to a payday loan service:

    1. SELL SOMETHING. I am staring at thousands of dollars of equipment right now that I could sell if I was in a bind to pay something for $500 – $1000.

    2. Borrow it from a friend or family member
    3. Do some contract work. Mow some lawns. Clean some houses. Walk into a pizza place and tell them that you need a job as a delivery driver and you need to start TOMORROW. You’ll be surpised how many of them will hire you on the spot, and you’ll make cash tips each night.

    There are endless options for scrounging up some quick cash no matter what your demographic may be. Hope this helps you understand my intentions for the post. Thanks for your opinion, I wouldn’t have approved the comment if I didn’t value it.

  • http://wealthweekly.blogspot.com Charles J

    Pretty fierce back-and-forth here, but I’m with you on this one Erik. Times do get hard, and people do make emotional decisions, and the Payday Lenders are there to take advantage of it. A $100 Payback on a $600 Loan is very bad, and if you need money really quickly, I can see how people may opt to use them. Doesn’t make it right though, because vast majority people who use the payday companies use them frequently.

    I saw your earlier article and would be interested in doing a link exchange with you as well. Just send the details to my e-mail about how the review process is supposed to go–I’m a bit confused about the 5 reviews–(do you mean referrals, or 5 reviews from different finance bloggers, etc.)

    Take Care,

    Charles J

  • http://www.consumerismcommentary.com Flexo

    I agree that Payday Loans are bad, bad products and probably shouldn’t exist. They wouldn’t exist if they didn’t fulfill some sort of need, but in most cases, they help perpetuate expensive debt. But 1. accepting advertising doesn’t imply endorsement and 2. if the companies want to waste money, I’ll take it from them.

    Personally, I find paid reviews worse than sidebar ads because the advertisement is “disguised” as real content.

  • erik.folgate

    I don’t have a problem with paid reviews if it is clearly written that the following review is paid. Reviewme.com does not allow you to post a review without putting a disclaimer that it is a paid review. I think that’s responsible blogging.

  • J. Bradner

    I am not so sure we should be quick to eliminate payday loans. I used to be totally against them until I thought, “who else is lending to the poor?” This was around the time Yunnis got the Nobel prize. Payday and title lending are the only source of access to capital in many poor communities. In a way, they are Americanized micro-lenders. Many of the poor have lousy credit because to them, what’s the point? Now, if a person is responsible with the loan and pay it back quickly, the loan becomes a tool to rebuild credit, which can ultimately lead to home ownership, aka “the American dream.”

  • http://paydayloanlocations.org/ payday loans

    I agree with you john.. and me too, I look to personal finance blogs for advice on money matters. you said it ryt thata payday loan is meant for people to borrow only what they need :)

  • http://www.loansdale.com/ N. Meyers

    I suppose this is a pretty controvercial issue and I tend to agree with the last comment. There is no sense to be too hard about such aspect of lending as there are situations when they can help the rich and the poor equally… the problem is that there are too many companies at the moment and on the Internet you can never know who you eventually gonna deal with… And well, you are right about the responsibility of a blogger; but perhaps, not elimination of such topic can help but better selection of the company you write about… looks like this to me)

  • Instant Online Paycheck

    There are a lot of reasons why people engage into loaning and lending, primarily, there are a lot of unknown incidences that could happen instantly that leaves us unprepared financially like accidents and the like, some because of losing their job too soon, and the others to cope with their debts.

  • http://www.paydayloanusa.co/ Maria John

    Payday loan. no doubt a good facility for the people who need instant financial help. Because sometime people require urgent financial help and they find no way to solve the problem. In these tough conditions they can apply for a payday loan and avail this facility.
    I agree that these loans normally have a high rate of interest but if you manage wll your resources , you can pay it before the next paycheck..

    • http://billcollectorshateme.blogspot.com/ Bill Collectors Hate Me

      Although I am no longer in the payday loan shuffle, I certainly agree that they do serve a purpose as long as you are disciplined enough to not get caught in the trap.

  • http://billcollectorshateme.blogspot.com/ Bill Collectors Hate Me

    Although I can see the authors point of view on this subject, overall, I have to disagree. I run a credit and financial advice blog and I agree that principle is great but sometimes you have to do what you have to do to pay the bills. My blog has the occasional payday loan ad pop up at the same time I’m telling my readers to avoid them but the simple fact is that the money generated from those ads for payday loans helps to keep my blog up and running. I will always advise my readers to avoid payday loans but I would never discourage them from clicking on the ads. That would be like taking food off of my table.

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