Payday Loan Lenders
Mention payday loans and you are likely to evoke some extreme reactions. While on one side you will hear how payday loans are a boon to the individuals and families in need, on the other side you might as well hear stories of how payday loans ‘prey’ upon those in need. The focal point amidst all this remains the payday lender. Are the payday lenders the altruists who are out to alleviate the sufferings of the poor or are they the worst facet of capitalism, whose single point agenda is to make profit at the cost of happiness of others? The answer is ‘None of these’. Let us explore and understand this curious case of payday loan lenders.
First, we need to know what exactly payday loans are and what do they do
Payday loans are short term cash advances that are made against your next monthly paycheck. They can range from anywhere between $100 to $1500. The main aim here is to provide you with enough cash to meet any urgent or otherwise important expenses, when your regular finances are unable to do so. Point to be noted here is that they are really easy and fast to obtain, so you are getting the cash you need in a matter of hours, irrespective of your credit score.
The role and risks of payday lenders
- Thus payday lenders play a very important and often overlooked role of putting the cash back in your hands whenever you need it.
- Keep in mind that the traditional financial institutions like banks would not lend money to anybody with a poor credit score. The payday lenders on the other hand take this risk of lending irrespective of the credit history and thus expose themselves to the risks of lending to the potential defaulters.
- Also unlike other loans, there is no collateral for payday loans. So basically, the only security that a payday lender has is your next paycheck!
- This would explain the so called ‘high’ interest rates on the payday loans. The payday lender is taking a huge risk and some studies indicate that the average rate of defaulters for any payday lender is upwards of 25%. Thus the ‘high’ interest rates are only meant to shield these lenders from such defaulters.
- In many states where the interest rates on payday loans were capped, most of the payday lenders have gone bankrupt.
Predators or Preys?
- Regarding the charge that the payday lenders target only the distressed, ask yourself, who would a Rolls Royce showroom target? Obviously, they target the super rich, those who can afford it. The same way payday lenders target their marketing efforts on those who need them, and the rich people often don’t need payday loans!
- Finally, in these times of recession when the economy is fighting the lack of liquidity because the regular lenders would just not lend, payday lenders could just be the saviors we need. They are injecting the liquidity back into the economy, while taking risks that the regular lenders are so unwilling to take.
While it’s true that there are a few bad apples amongst the payday loan lenders who are giving a bad name to all of the tribe, but then it’s true for any business, so it’s up to the consumer to be careful.
Right on – these loans make small amount, short term credit available. Here’s something that a lot of the anti-payday loan lobby likes to leave out: one of the components of a lot of bank loans is the finance charge. You have the principle, interest, PLUS a fee on top of it for making the loan in the first place, and finance charges can be outrageous. Essentially, the only difference is the size of the loan, term of repayment, and also let us not forget the institutional status of banks to begin with. Should they get that kind of reputation? To an extent, certainly. However, in a historical context, banks are vulnerable as we have seen in the last year, whereas payday lenders haven’t gone crying to Congress needing a bailout because they misinvested their funds, have they?
Are you kidding me? Payday loans are the worst and only prey on people during these economic times….Average Apr is 160%. If you borrow $100, you pay back $110 in 2 weeks, So your 10% FEE of advance x 12 months.. overall APR payed back in 2 weeks 120%…You must be kidding…Worst loan ever made and will only hurt people
I have worked in this industry for nine years. There is an enormous risk involved with our business. The fee is a flat fee, and varies from state to state. The government does regulate these businesses and the amount that we charge is based on what each state allows us to.
These loans are intended for short term emergencies, for example a sudden car repair or doctor bill. The intent is for the consumer to budget accordingly, borrow what they can afford to pay back on their next payday. Realistically we get consumers who come in and ask “how much can I get” instead of “this is what I need”. We do cater to a compulsive clientele who typically lives at or exceeds their personal budget.
I assure you, everyone has a budget, it simply varies from household to household. I see customers who bring in minimum wage, and I see those who bring in over $3,000 a pay period. Everyone has a budget cap, and life throws us things that we are not always equipped to handle at the moment.
Our customers come to us because they have no other options. I have been the sole reason on many occasions that a family has gas or groceries, utilities or rent is paid,Christmas presents for the kids, a family pet received a medical procedure they needed; I could go on and on.
We offer a service to those in need. It is up to the consumer to borrow what they can realistically afford to pay and to budget accordingly. I have opened more accounts over the years because of a banking institution’s fees than probably any other reason. If a customer overdraws their checking account by a mere penny…the bank charges and overdraft of $25-$42. If you add up the percentage that the overdraft costs them for being even a penny over, the banks are charging interest at comparative, if not higher rates than Pay Day Lenders do.I have seen on several occasions a customer writes six checks, the bank will pay the highest amount check first and then bounce the other five at $25-$42 an item, and the customer gets hit with fees from the businesses as well.
By using our service, a customer can realize the error they made in their calculations, borrow a quick $100, pay back $115 and avoid all of those charges at the bank. When used as intended, this is not a bad service. As is the same with credit cards also, the consumer needs to be responsible and use what they can realistically afford to repay.