Payday Loans Create a Debt Trap.

For California families living paycheck to paycheck, the high price of a payday loan and the fact that it must be paid off in one lump sum two short weeks later virtually ensures that cash-strapped borrowers will be unable to meet their basic expenses and pay off their loan with their next paycheck. Consequently, too many Californians are forced to pay off one loan and immediately take out a new loan, repeating the cycle over and over. Although payday loans are marketed and publicly rationalized as a short-term loan for an occasional, unexpected expense, research shows – and payday lenders actually admit in private – that the business model is designed to keep borrowers coming back for more and more payday loans

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