Payday Loans- Studies and Reports
- November 12th, 2008
- Posted in Payday Loans
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I still can’t believe the blatant lies I’m seeing in articles, news stories and other sources about payday loans. That’s why I’m posting this link to payday loans studies and reports. I also need to explain a few things about why payday loan critics are way off base.
You’ll find the biggest critics of payday loans are people who work for banks, credit unions, financial planning firms and other “experts” in money. They use their perceived credibility to convince people to do what works best for them, not consumers. You really have to question the values of someone within the financial industry giving you advice that has you buying something from them. Again, use the studies done as a reference to counter the silly attacks made by cash advance critics. I’ll counter a few here.
Payday lenders target the military
In October of last year the government made a 36% APR cap on loans to the military. No payday loan has been offered to a military person in over a year.
Payday lenders target minorities and the poor
And banks target the wealthy and those with good credit. Of course industries have target markets; certain people need certain products. Payday lenders have a resonating message for anyone in financial distress or with bad credit. Minorities who are illegaly living here can’t even get a bank account, so it’s even harder for them to get any kind of loan. The kind of people who can benefit from payday loans are those who don’t make a ton of money, usually around the national average or less. Payday lenders aren’t preying on victims who are poor or minorities; they are providing them a service that others won’t.
Payday loans are predatory because of high APR’s
APR is a terrible metric to show how much a payday loan costs. 390% APR on a $100 loan will only cost you $15 in two weeks. Often times consumers end up paying about 15% in interest. This is because the term of the loan is so short. Look at a bank’s loan for 3 years at a mere 20% APR. If you have that loan out for 5 years you will end up paying 100% in interest! If you borrowed $2,000 you will pay back $4,000. And payday lenders are the ones ripping people off?
Read the studies and reports done on this subject and don’t believe the spin people are putting on payday loans. Do you think the industry grew so rapidly because they ripped people off and got them into mountains of debt? Hello!? Lenders only make money when borrowers pay them back. Bad business sense to loan money to someone who won’t pay you back. Payday lenders provide a service to people and that’s why they are successful. Just look at the facts next time you here someone talk about it. Facts can be stubborn things.
Payday loans cause bankruptcy
An interesting blog post discussed a Clemson study showing no connection between bankruptcy and payday loans.
One of the biggest problems with Pay Day loans is like Bank Fees, . The old finance rules of 76 or simple interest were caped at 36% on the first 750 / then 750- 2499 24% /then over 2500 18 % . Now the Banks charge 33-40 per check fee or over limit fee, plus daily fees, if not paid with in a limited time frame. (Banks) are costing compounded over charged fees, while (Pay Day Loans ) have fee amounts if your getting a 250 dollars advance, it cost you as much as 40 dollars per renewal a month x 12 months, that is 672 % interest a year.
Were is the (Department of Finance )regulating these over charges. they need to (Cap) those fees and limit there (interest charges).
Were did all the (small loan companies) go that based there judgement on the consumer , they were regulated, and did not use bias from an (unfair credit score system created by the 3 major credit reporting firms).
These fees, charges and credit scoring systems , are all unfair practices against the consumer, with negative profiling of consumers.They are bias and unfair.
I have taken a payday loan when i was short on cash, and it was very easy. I paid it back when I got my next paycheck. Cheap payday advances are very resourceful to many people.
However, the usefulness of such payday loans highly depends on the applicant needs. For a person in emergency who expect can payback in due date, such loans may help. The condition of loan lender is important too. Very high interests are a drawback, but some companies are more customer oriented and even accept bad credit persons.