Temporary Cement: What Payday Loans say About the Wage System

Payday loans are short-term and high-interest loans that also come with fees. As long as one has “a bank account and a job”, they’re pretty easy to obtain. Although these loans seem like a quick, over-the-counter way for lower-income individuals to procure necessary funds, they’ve repeatedly come under fire for several reasons. Opponents claim that payday loans ensnare borrowers in a cycle of taking out new loans to pay the costs of older loans, forcing America’s poorest workers to pay exorbitant fees on far more than what they had originally borrowed.

However, are these loans really so bad? As discussed in Freakonomics Radio, the majority of borrowers know what they’re getting themselves into, and are simply choosing the lesser of two costs. If a late phone bill would cost more than interest on a loan, who wouldn’t go with the loan? Regardless if payday loans are further regulated  or left alone, there is a more significant takeaway from the episode: the fact that working Americans need to take out high-interest loans when faced with extra expenses illustrates that their wages simply aren’t enough.


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