You see them at every grocery or drugstore checkout line — brightly colored Peeps calling to you from the display. Does anybody ever go to the store with Peeps on the list? Certainly nowhere near as many people as those who come home having purchased them.
They’re not unlike payday loans — stay with me a minute, even if you love Peeps (and we certainly do). Payday loans are never on anybody’s list of ideal ways to make ends meet. And yet, payday lending is a big business. Somehow, similar to the bright-colored marshmallow chicks we didn’t plan to buy, we may find ourselves in payday loan debt we didn’t plan to go into.
Here’s how Peeps and payday loans are similar.
1. One Almost Inevitably Leads to Another
The Peeps are technically one big marshmallow that can be easily divided into smaller “servings.” But they are joined. With payday loans, you typically sign up for one. With a plan to pay it off and be done with it. Only that probably happens as often as someone opens a package of Peeps and consumes only one. Just 15% of borrowers pay within the initial 14 days of borrowing (when they first come due), according to the Consumer Financial Protection Bureau. Even then, you’ll have already paid origination fees, and probably interest (as an annual rate) of more than 100%. While it’s true that some people pay them off right away, it’s reasonable to assume that just about everyone intends to. It’s just hard to do it. The financial situation that made you consider taking out such a loan usually isn’t going to change so dramatically in a couple of weeks that you can pay your regular bills plus pay off your payday loan. And the lender would be happy to extend it for you (for a price).
2. They Last Just About Forever
How many centuries can Peeps last? The Huffington Post checked to see what would happen to Peeps left open on a desk, for a year. Oh, they changed a little bit, and they were definitely beyond their “best by” dates, but the difference was not terribly dramatic. (And interestingly, the older the Peeps, the harder they were to separate.) And payday loans? A year later, you may still be dealing with them. Or, maybe when you gave up on paying, the bill was sent to collections. That “temporary” loan, taken out to tide you over, can cost many times what you borrowed, and can come back in the form of a collections account that can hurt your credit. Like Peeps, a payday loan doesn’t die easily.
3. They Can Be Hazardous to Your Health
No one who buys either product is doing it because they believe it’s good for them. Besides, it’s short-term. Peeps won’t be around forever anyway. Or at least they won’t be tempting you at the checkout forever. Payday loans just seem simpler than worrying about what you’ll do in the few days before your next paycheck. The loans are normally under $500, which seems like a fairly small indulgence, and unlikely to do real damage to your finances. And if you’re in the 15% of people who pay the loan back within 14 days, it shouldn’t hurt your credit. It isn’t always destructive to your credit. Peeps, in relatively small, seasonal doses, are probably not going to hurt you. But if your goal is better physical or financial health, Peeps or payday loans can, at the least, slow down your progress. And the potential is there for more damage than that.
If you are using payday loans, it can be helpful to keep track of your credit. By checking your free annual credit reports and monitoring your credit scores (which you can do for free with a Credit.com account), you can be more aware of the impact your financial decisions have on your credit over time.
4. They’ll Appeal to You in a Moment of Weakness
As easy as it is to add Peeps to a shopping cart, it’s not entirely outside your control. You may, for example, have more control on your way home from the gym. And as for payday loans — if you’ve been digging out of debt the old-fashioned way, and an unexpected expense throws you for a loop, you may be far less inclined to take out a high-priced loan for “just a few days.” Either way, you’ve worked far too hard to let all that effort go to waste. (Though if you do slip, it’s so much easier to get back on track than if you hadn’t been taking care of yourself in the first place.)
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