How do I avoid getting into the payday loan trap?

A payday loan is a short term loan provided either through a local loan store or through an internet based provider. These loans are normally 14 days in length and carry a fixed fee of 20-25% of the loan value. Some payday loans are renewable, which by just paying the fee, you can extend your payoff another 14 days. If you extend rather than paying in full, you have just fell into the payday loan trap. The payday loan trap is an endless cycle of borrowing and paying off the same loan and paying huge amounts of interest to be able to do so. Most customers continue paying just the fee until they are required to pay off the principal in full. By that point they have more than likely not been able to catch up and will have to take out another payday loan.

We all have unforeseen things happen to us and think ‘well if I can just borrow a little money to get by this week, everything will be ok’. We are just digging our self a little hole. If we don’t pay off the loan in full when it is due or pay down against the principal, we have just dug that hole a little bigger and it becomes an endless cycle of robbing Peter to pay Paul.

To avoid getting caught up in the payday loan trap, there are several steps you can take:

  • Never take out a loan for non-essentials such as vacation, entertainment, etc.
  • Only use payday loans for emergency situations
  • Try not to borrow more than 50% of your next paycheck
  • Never borrow more than you need or can afford to pay back in 2 weeks
  • Shop around for the best rate of a payday loan
  • Never pay just the interest and extend the loan, be sure you can pay it in full
  • Set up a budget. Write out all your expenses and their due dates vs. your income

Setting up a budget is extremely helpful in understanding just exactly how much discretionary income you have. On our website, under our eZlearn/Money management page, we have downloadable templates that you can use to set your long term goals, and templates to keep track and manage your money. We also have a savings account to set aside money each payroll for those emergencies that come up unexpectedly. If you set it aside a little each week, you will never miss it.

At ReadyFUND$ we understand that sometimes you do have an emergency and   need a little extra money. ReadyFUND$ cardholders do have a short term loan option called eZaccess offered by a third party company with a low loan rate. eZaccess has features that help prevent you from falling into the Payday loan trap.  For more information, fees, terms and conditions, log into your ReadyFUND$ account at

“If you see yourself as prosperous, you will be. If you see yourself as continually hard up, that is exactly what you will be.”
Robert Collier