Sheila Allen is a divorced mother of three, working to make ends meet and receiving only the occasional support from her ex-husband to keep her kids feed, clothed, and a roof over their heads. Most months they are simply scraping by, while other months Allen family financial condition is simply dire. Recently, Sheila decided she would actively pursue a personal loan to tackle some of her crushing debt. Unfortunately, she was turned down by two different lenders, both of whom said that her credit score was too low. One week, seeking to avoid late penalties and fees Sheila decided to get a payday loan. Unfortunately, that decision has ruined her credit completely.

Payday loans aren't a disaster for everyone, but they can be for the person who doesn't have the means to make repayment on the loan. In Sheila's case she had every intention of paying back the $1000 she borrowed but she failed to take into consideration several things when opting for this type of loan including:

--Sheila didn't realize that she would be charged $24 for every $1000 borrowed. Thus, at the end of the loan she owed $1240 which was $150 more than what she had.

--To avoid defaulting, Sheila extended her loan another 14 days. Unfortunately, that decision drove her loan to just over $1500 in less than one month's time.

--When Sheila realized that she never could pay off her loan, she notified the payday loan company who demanded that she make payment or face legal action. Unfortunately, in the meantime Sheila's second child broke his arm and her out of pocket expenses eroded her cash further. Sheila sent the company a check for $555 which was nearly $1000 short of what she had owed the company.

Today, Sheila's credit has been destroyed and the Payday loan company is hounding her. With the help of a pro bono attorney and an advisor from the county clerk's office, Sheila settled with the company for $750, money that her ex-husband scraped together. Unfortunately, there is now a red flag in Sheila's credit reports announcing the incident which will hound her for many more years.

The moral of this story, what could it be? Don't use a payday loan unless you are familiar with all of the terms and have the means to pay it back. Sheila's credit is destroyed and her family has been pushed deeper into poverty because of her poor financial decision to seek a payday loan.