Why should someone avoid payday loans?

Payday loans are often criticized for their high fees, which can lead to a debt cycle that is difficult for borrowers to escape. Because these loans are typically short-term and geared toward individuals who may be in urgent need of cash, the fees associated with them can be exorbitant, sometimes exceeding 400% annual percentage rates (APR). This extreme cost structure can trap borrowers in a situation where they need to take out additional loans to pay off the original one, leading to a cycle of debt that is financially devastating.

While some may perceive payday loans as having low interest rates or mistakenly assume they are hard to obtain, those aspects do not capture the significant financial burden created by the fees associated with these loans. Additionally, the notion that good credit is required to obtain payday loans is misleading, as these loans are often marketed to those with poor or no credit history, which is part of the reason they can be so detrimental to a borrower's financial situation.