Payday loans are moving into better neighborhoods, but, believe me, they’re not any better an idea than they ever were. Elizabeth Warren, Harvard law professor who serves on the congressional panel for the U.S. financial bailout, agrees. “More middle class families are using payday loans to put off the day of reckoning,” Warren says.

A recent Indianapolis Star article, “Caught In A Money Pinch” (Feb. 3, ’09) points out that people who used to get needed cash from banks, credit unions, and credit cards are forced by the current credit crunch into high-interest payday loans. And when I talk about interest on payday loans, I do mean high. As a long-term bankruptcy attorney in Indiana, I’ve seen my share of payday loans (see “Who’s Really Getting Paid On Payday Loans?”) and I also see my share of their sad results.

The reason payday loans are so profitable for lenders – and so awful for borrowers – is that most people ask for extensions. Rolling over a $200 payday loan three times means an annual interest rate close to 400%! You’d think people would realize these kinds of loans hurt more than help, but Hoosiers last year paid $73 million in payday loan interest and fees, a recipe for disaster if ever I’ve seen one.

In one of my earliest bankruptcy blogs, “Who’s Paying For All The Payday Loan Ads, And Why?”, I asked readers to count check cashing and payday loan establishments as they drove to work (hint: there are now 430 such locations around Indiana) and then to drive on by. The next stop for anyone who gets to the point of considering payday loans just to keep everyday bills paid needs to be the office of a bankruptcy attorney. Best to get professional advice before things go from bad to worse to – bankruptcy.