Fighting for Survival
In the midst of a financial crisis and a failing economy, payday lenders are fighting to stay alive as local, state, and federal regulators try to cap the interest rates these lenders charge consumers for short term payday loans.
The latest in the line of persecuted payday lenders is South Carolina based Advance America Cash Advance Inc.
Advance America Cash Advance claims that it can’t make enough money under the new laws that are being passed to keeps it’s doors open to it’s consumers, effectively driving them out of business like many other payday lenders across the country.
New Law, Old Tactics.
For payday loans stores in New Hampshire, the law that takes place on Thursday, January 2, 2009, and will cap the percentage rates to 36%.
For consumers, 36% may even seem like a high interest rate but the thing to remember here is that the interest rates are calculated on an annual percentage rate basis, so for a one hundred dollar payday loan, a 36% APR would equate to only about $1.38 in total interest charges on a two week payday loan. This is barely over 1% of the total loan value.
Clearly these tactics are aimed at driving these lenders out of business without having to officially ban them.
Next on the Endangered Species List
What Is Fair?
Typically payday loan lenders charge around $20 per $100 borrowed on a two week term. This amounts to an annual percentage rate of about 521%. The new cap reduces revenue per loan almost 1,900% which would be a heavy blow to any business’s bottom line.
The question as to what APR is fair is up to consumers not regulators. If the rates are to high consumers won’t borrow extra cash utilizing these lending services which will force these businesses to find a profitable balance between revenue and market share.
A New Hope For Survival
To stay alive, Advance Cash America Advance is hoping to loan money under other sections of banking law. This would allow the company to charge their usual annual percentage rates without falling under the current restrictions of the new laws passed against payday loan lenders in New Hampshire.
The Pro and Cons of Payday Loan Lending
The battle for and against payday loans has been a continuing battle and a constant struggle for lenders across the country with many states already implementing bans on payday loans.
Why the animosity towards these lenders? Opponents call them predatory and convince the public around them to believe the same with advertising campaigns that draw attention to the perceived high annual percentage rates of 521 percent but in the process fail to explain what the total interest on the loan would actually equate to.
The uneducated public looks at 521% as having to payback over five times the amount of the borrowed loan. It’s no wonder they get outraged and fall towards the opponents side of the payday loan debate.
The Cost Cost of Payday Loan Regulation
Banning and or putting payday loan lenders out of business is really a shame for many reasons. First off we have people losing their jobs in an economy that cannot afford to continue in that direction. Secondly, payday loans offer a service that is unparalleled by any others within the financial industry.
Hundreds of millions of dollars in these loans are given out out to applicants each year proving both their popularity and their worth. Bad business will eventually crucify itself. The fact that these cash advance centers are still open is a testament to the value of their services.
What Makes Payday Loan Lending Valuable to Consumers
Nowhere else can you go today to apply for extra cash and receive it almost immediately after approval.
You can now apply online for payday loans and have funds deposited directly into your account. These loans usually don’t amount to more than $1500 and require minimal criteria for approval making them ideal for individuals with bad credit or no credit at all. The two most important requirements applicants are required to have is a current employment and a checking account for funds to be deposited into.
For life’s little emergencies that demand extra cash, payday loans are hard to beat. For example, if your car breaks down today, how do you get to work tomorrow? Perhaps your short on funds to pay your monthly bills where a payday loan could help you save money by eliminating lay payment fees. Maybe it’s the high scho0l prom this week and you need to purchase your daughters dress, but your short on funds till your next payday. Emergency funds are needed from time to time and that is what makes payday loan lending a valuable service.
There are hundreds of scenarios that could find you benefiting from the use of payday loan services. Be sure to take the time to educate yourself on the payday loan industry before joining forces with payday loan opponents. After all, you may just find yourself in need of payday loans yourself someday.
These caps on payday loan lending are not really good ideas, and as with so many things, it is done under the aegis of the common good – the idea that reining in this “evil” will somehow protect the general public. Its a sham – the majority, and an overwhelming one, of payday loan customers pay back their loan on time. Do we think that it is a good idea to drive out entire industries and thousands of jobs in the process? No, not at all.
Banning payday loans would be a huge mistake considering it is probably the only type of loan that Americans can actually qualify for in this economy. And Perky is right if we put the payday loan business out more people are going to lose their jobs making the economy worse.
This is just another way for goverment to watch over us, and I don’t like it… I tried to get a payday loan today with advance america and the nice women told me at this time we can’t lend monies only take it in, she said the corp office is trying to work with NH Banking Commis, So I ask the big spending senators will you lend me 300 buck so I can insure my kids are warm, or should I just bounch a check and pay triple on bank fees, then I would have with a payday loan, O-yea senator I will only give you back $4.14 on the 300 I borrowed,