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Escaping the Endless Payday Loan Cycle

by Solution Loans on 06/10/13

I had a long conversation with a customer whose was caught in the typical cycle of payday loans. 


 He works about thirty hours a week earning minimum wage. About five months prior to coming into Solution Loans, his car broke down and in order to get it back on the road very quickly, he took out a payday loan.  

The problem, of course, is that the loan he took out – say, $200 – charged a significant fee for the service. The average payday loan charges somewhere around $50 in fees, according to this article, which also outlines habitual payday loan practices:  

The Consumer Financial Protection Bureau found that the average consumer took out 11 loans during a 12-month period, paying a total of $574 in fees — not including loan principal. 

So, let’s take a look at the customer in question. He took out a $200 loan and, after the fees and interest, he is on the hook for $240.

Now, his weekly check for thirty hours a week adds up to $200 a week. He agreed to pay half of the total money this week and the other half next week. 

He fixed his car on Tuesday but on Friday he will only keep $80 of his paycheck after paying the payday lender, which has to last him the following week. After that week, on Friday, he will get another paycheck, but he can only keep $80 of that check, which again has to last until the following Friday, at which point he’s free of the loan. 

In other words, our friend here has to go through a seventeen day period where he’s only bringing in $160. If it’s perfectly timed, he’s not going to have to be late on any bills. 

But let’s say that seventeen day period crosses the first of the month, meaning he’s going to be late on rent? Or, let’s say it crosses the due date for his electricity bill? 

In both cases, he’s probably getting hit with a late fee, meaning the burden of his bills is even steeper. 

He’s also likely not in a position to explore other forms of credit due to a poor or very short credit report. 

His other option? Another payday loan. It’s a vicious cycle that’s very hard to escape from. 

So, what can he do?

We offered him a solution that will give him the financial freedom to maintain his current bills, fix his car, and with a payment of 20.00 we ensured it fit into his budget.

Don't get caught in the payday loan treadmill, Solution Loans offers a true bank type solution that can easily fit into anyone's budget.

Solution Loans,





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