Sometimes, if something seems to good to be true, it is. And sometimes you need to beware if something seems easy. There are differences of viewpoints on whether guaranteed payday loans are good — some describe them as predatory with exorbitant interest rates, whiles others argue that it’s better than a bank overdraft fee or having to borrow from a family members. Guaranteed payday loans often advertise the fact that you don’t need good credit or a long sit-down conversation about all of your financial history in order to get a loan. Typically, you need little more than a job in order to receive a loan from a payday lender. Many financial advisors and economic experts will advise you to stay away from a guaranteed payday loan, warning you that it’s a trap and a slippery slope that will keep you in debt.

A Guaranteed Payday Loan is Against the Law In Some States

In some places, a guaranteed payday loan is considered criminal. If it’s criminal, then it’s definitely unethical, but if it’s not against the law, it isn’t necessarily ethical either. Initially, the interest rate on a payday loan might not sound like much — for example, a 15 percent loan on $200 over a two-week period is $30, which may not sound like much. But consider that a 15 percent loan over a two-week period is actually a 390 percent interest rate over the course of a year. Then consider the fact that generally an 18 or 19 percent interest rate is considered high, such as was common during the last ’70s and early ’80s. However, the Federal Reserve Bank does not define payday lenders as predatory, since poorer households are less likely to be denied credit but not more likely to miss a debt payment. The Federal Reserve Bank does, however, consider payday lenders to be expensive.

Different Types of Guaranteed Payday Loans by State

In about a dozen states such as North Carolina or Georgia, guaranteed payday loans are either illegal or just not optional. In South Carolina, consumers are only allowed one loan at a time, never in excess of $600. In New Mexico, the loans can be up to $2,500 but there are now limits on the fees they can pass on to consumers.

Seeking Options Other Than a Guaranteed Payday Loan

Some may argue that payday lenders are better than any alternative. If you’re out of money or your car breaks down and you need your vehicle for your job, then you may not have an option. But others will argue that there’s almost always an option, and that usually your situation isn’t that extreme. Going into debt has become a common philosophy of life today, and many elderly people will tell you that’s not the way things used to be. If you can, find a friend or family member who can help you out, or try to find ways to cut costs. To a certain degree, there is some subjectivity in deciding whether a guaranteed payday loan is ethical, but one thing is for sure: it’s better to purchase with cash than to go into debt and commit yourself to interest.

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