Payday loans have not put this woman on the street. This study indicates that there is in fact no clear correlation between using payday loans and facing financial calamity like bankruptcy. (Photo: flickr.com)

Human Ecology professors Ruth Berry and Karen Duncan of the University of Manitoba appear to have been ready to point the accusing finger at payday loans in Canada. Given supporting data, it appears they would have been happy to report that payday loans and bankruptcy were strongly connected in the Great White North. However, “The Importance of Payday Loans in Canadian Consumer Insolvency” does nothing of the sort because doing so would fly in the face of hard evidence. There is no clear correlation between bankruptcy and use of payday loans in Canada, according to the authors of this study. In fact, the overall financial well-being of payday loan customers appeared to be slightly more favorable than those surveyed who did not use payday loans.

Payday Loans in Urban Centers and Inner Cities

In much the same way that payday lending has grown across the American landscape, payday lenders have stepped in to serve people of the inner cities who have been abandoned by the traditional banking industry – all because there wasn’t enough money to be had. And yet the same banks are the ones who charge payday loan companies with exploiting the public. While it is true that interest rates (when annualized as APR) for payday loans are higher than some traditional bank loans, the ease and convenience of payday loans tends to trump the offerings of banks and credit unions who demand higher customer qualifications and force applicants through a maze of paperwork. Credit-constrained consumers who lack liquid assets continue to find payday loans infinitely useful.

Berry and Duncan Want to Find the Payday Loan-Insolvency Connection

In their quest for this grail, the authors obtain data from “the main industry players in the payday loan field in Canada,” namely National Money Mart Company, RentCash and Cash Money. They also reference the Canadian Payday Loan Association, which is the national industry association that represents at least 40 payday loan companies (including those mentioned above), and the Financial Consumer Agency of Canada through analysis of related studies.

Previous Studies Didn’t Find a Connection, Either

“Not much literature exists connecting the experience of payday loans with consumers filing for bankruptcy,” write the authors. Perhaps this is because there isn’t a real connection? One study they cite found that only one in 10 payday loan customers filed for bankruptcy following a payday loan. Other studies noted a similar percentage. Those respondents who were found to have multiple payday loans at the same time may have been more prone to bankruptcy, but this group was found to be a minority. Moderate usage – which represents the majority of payday loans – shows no clear correlation with bankruptcy filings. In fact, a study by Robert Mayer (”Payday Lending and Personal Bankruptcy,” 2004) showed that those who displayed such moderate use owed only 17 percent of net monthly income, which is hardly a bankruptcy-inducing situation.

More Findings that Break the Mold

• The authors’ data indicated that payday loan customers tended to hold less in the way of long-term loans that did those surveyed who did not use payday loans. Such loans were most often mortgage loans.
• Interestingly, those who filed for bankruptcy and had used payday loans carried “significantly less” short-term debt than those bankruptcy filers who had not filed for payday loans. Payday loan customers held a mean of $14,485 in debt for 2005 and $13,938 for 2006, while those who did not use payday loans showed a mean debt of $25,972 and $26,615 in those years.
• Insolvent consumers didn’t display any tendency toward being either male or female.
• Households surveyed who used payday loans tended to be smaller than those households who didn’t.

Data by City

Berry and Duncan analyzed data from a number of major Canadian cities. What they found tended to be consistent with what has been discussed thus far: that payday loans do not correlate directly to bankruptcy and that payday loan consumers tended to display greater financial well-being than those surveyed who had never used the short term loans. Here’s a sampling:

Vancouver: Bankruptcy households who used payday loans versus those who did not displayed a higher average income.

Calgary, Edmonton and Toronto: Payday loan users showed much less long-term debt.

Installment Loans: Yet Another Path to Avoiding Bankruptcy

Berry and Duncan freely admit that “bankrupts with payday loans are more likely to be employed and have higher incomes and lower debt-to-income ratios than other bankrupts.” This brings them to their burning question: “Do payday loans contribute to bankruptcy?” Numerous studies paint very different pictures regarding the average amount for payday loans. Since more of them point to relatively small figures, it seems unlikely that such amounts would contribute heavily to bankruptcy. And since many lenders offer installment loans as an option in the event that a consumer is unable to pay their payday loan on the maturity date, there is a built-in path leading away from default and bankruptcy.

There’s an Indictment in Here Somewhere

Despite the fact that they found that payday loan customers tended to be more financially healthy than those respondents who never used the product, Berry and Duncan continue to operate from the position that payday loans are some evil product that should be avoided at all costs. Such is not the case, truly. They fulfill a need that traditional banking has largely ignored. Oh, but if only “mainstream lenders provided more accessible services, and educational institutions and non-profit or government agencies gave more objective information about payday lenders in public service advertisements, perhaps these borrowers might attempt to access other lending options,” write the authors. They follow that statement with the false claim that payday lenders do not make their interest rates known to consumers. In America, payday loan companies are required by the Truth in Lending Act to make this information readily available to consumers.

Prescience and Payday Loan Law

If there were only a database in place that could record payday loan usage, then perhaps there would be fewer abuses. That’s what the authors suggest in their 2007 study, and it has come to pass in numerous U.S. states. “A model that might be considered for regulating the number of payday loans held by one individual is the Drug Program Information Database (DPIN) which connects Manitoba Health and all pharmacies in Manitoba to a central database,” they write in reference to a 2006 Manitoba Centre for Health Policy study. “This prevents duplication and double-doctoring by providing the dispensing pharmacy with real time information to show the patient’s drug profile and allows the pharmacist to deny filling a prescription, which is the same or similar to another recently prescribed.” This is quite similar to what we see with payday loan databases. Such inventions do tend to lean toward the nanny state frame of mind, but many lawmakers have insisted upon pushing it through.

Correlation Does Not Imply Causation

And in this case, the authors can’t even draw a correlation between payday loans and bankruptcy filings in Canada. Certainly, those who have filed for bankruptcy would be burdened by any additional debt (including payday loans), but that implies no correlation (let alone causation). “It is not possible to determine whether the loan is hastening the insolvent’s decision to file for bankruptcy,” write Berry and Duncan. I’d go further than that, based upon their findings. I’ll say what they appear unwilling to admit: that payday loans help more than they hurt when used moderately (as most are). Bankruptcy is frequently the result of a complex mixture of financial and social issues. Payday loans are no scapegoat.

Sometimes it makes good sense to borrow money

A quick online loan can help you save money

Too often, your paycheck is spent the minute you get it. You pay a few bills, make a trip to the grocery store, and fill the tank with gas.

You’re almost tapped out.  Fortunately or not, your kid mows the lawn just like you asked him to. In fact, he does a great job. You hand him ten bucks, as promised.

It’s payday, and already the countdown has begun. Will you be able to make it for two weeks on $50? It can be done. You’ve proved many times that it can. But what if something goes wrong?

Borrow money before it becomes an emergency

Twice in recent weeks you’ve had to jump the battery to start the car. What if a jump start doesn’t do the trick next time? The water heater’s been knocking and if you were to be honest about it, you’d have to admit that really, the hot water hasn’t been all that hot lately. What if the water heater conks out before payday?

Some former colleagues asked you to meet them for dinner tomorrow night. You’re hoping it turns out to be an informal interview for a better job. The place they want to meet is spendy. You think they’ll pick up the tab, but what if they don’t?

Borrow money if you know you can pay it back on payday

The bills are paid. There’s food in the house and gas in the car. Do you put life on hold until next payday? Or do you borrow money today and do the things you need to do?

There’s nothing wrong with getting a personal loan when you know you’ll be able to get by comfortably on your next paycheck after paying it back. In fact, there’s a lot to be said for getting cash today and being prepared for the unexpected.

Borrow money today and sleep well tonight

If you need cash today and you know that getting a loan till payday won’t put you farther behind, it makes good sense to borrow money. A fast cash loan can spare you unnecessary expense. For example, why not buy a new car battery now rather than wait until the car won’t start again and you have to pay for a new battery plus towing?

If you think things through and borrow wisely, a payday loan can help you come out ahead of the game. When you’re down to your last few dollars and worried about how you’ll make it, a little cash until payday might even let you save some money on those expensive sleep aids.

APPLY HERE to borrow money

Payday loans are heavily regulated in the Canadian province of Manitoba. This flies in the face of reason, as 310-LOAN's executive study indicates. (Photo: picasaweb.google.com)

Governments both large and small often take it upon themselves to decide what consumers should or shouldn’t be able to do with their own money. Call this the “nanny state” mentality if you will. Regardless, it seems that a population is somewhat less than empowered if the ability to make financial choices is taken away, replaced by rules (explicit or otherwise). Through the eyes of capitalism, if consumers are not afforded self-determination, the market flounders and the people become increasingly dependent upon their government for financial protection.

The payday loans industry has taken its lumps when it comes to regulation-happy governments. Despite well-reasoned arguments that reflect the trends, tendencies and – dare I say it – general will of the people, numerous governments have managed to push through legislation that effectively kills consumer choice and destroys the payday lending industry within the affected region. In addition to the obvious unemployment that results from such careless legislation, the consumers who demanded the payday loan product are driven to less desirable (more expensive) alternatives. There’s a reason they weren’t depending upon the traditional banking system in the first place. Just because payday lending is regulated out of states and provinces doesn’t mean all of the consumers who depending upon payday loans are acceptable risks by traditional banking industry standards.

Manitoba Allows 17 Percent APR

This rate cannot sustain a payday lending business that relies upon payday loans alone for operating profits. It’s been proven many times over. Canada’s provinces have made life difficult for businesses that offer payday loans. British Columbia has a 23 percent APR rate cap, Quebec caps rates at 35 percent and Nova Scotia allows 60 percent. Compared with Nova Scotia, it seems that Manitoba payday lending lobbyists forgot to show up for the party. I jest, of course. One 2007 study by Andrew Smyth and Nathan Slee of 310-LOAN (considered to be Canada’s largest direct payday lender) makes such a clear case that one wonders if Manitoba’s government even read it. If they had read it and still voted to go with a 17 percent APR cap, you’d wonder either what axe they have to grind or who was fronting their retreat to Aruba.

“Evidence pertaining to public hearings before the Manitoba Public Utility Board to determine maximum allowable charges and fees for payday loans“

To preface the study, the authors cite a comment by Manitoba’s Minister of Finance at the time, Greg Selinger. Selinger said that “The intention is not to drive the companies out of business, because people are showing an interest in having this service, but to make sure that when they offer the service they do it in a way that’s just and reasonable.”

What is “Just and Reasonable?”

310-LOAN, according to the authors, clearly explains their fee structure to customers before any agreements are signed. They also verify that customers are actively employed as opposed to depending upon pensions or social assistance. That is a reasonable way to treat one’s payday loan customers, it would seem. Furthermore, 310-LOAN will not accept applicants who already have more than two NSF transactions in their recent banking history or more than one outstanding payday loan with another lender. They accept applicants who can reasonably repay their payday loans. Such is a protection for both the consumer and the payday loan company. Just and reasonable care is taken that neither party is exploited.

Who Uses Payday Loans?

The study authors utilize payday loan studies from Statistics Canada (StatsCan), IpsosReid, Environics, The Public Interest Advocacy Centre (PIAC) and StratCom. When available, these findings are compared against the general Manitoban population. The data for Manitoba indicates that payday loans are used by consumers who earn a slightly below average income for the province, but these consumers are far from being the “victimized poor.”

Average Age: Neither Too Young nor Too Old

According to Environics, the average Manitoba payday loans customer is 39 years old. StatsCan puts the number at 39.5, while PIAC found the average to be 42. With these and all the following results, it should be noted (and perhaps goes without saying) that the survey audiences are not identical.

Gender Split

It’s nearly a 50/50 split according to most studies. The 2006 Census for Manitoba gave a three to four percent bump up for female payday loan customers, however.

Marital Status: Most are From Married Households

The 2006 Census found that 48 percent of payday loan customers in Manitoba were married. Environics recorded 49 percent while PIAC was significantly higher at 59 percent. For single payday loan customers, the numbers were almost identical across the board: 35 percent by the Census, 35 by Environics and 31 percent according to PIAC. Only a small sample listed themselves as separated, divorced or widowed: 17 percent in the Census, 15 percent by Environics’ count and 10 percent according to PIAC.

They Will Have Residency

Partakers of payday loans in Manitoba tend to weight more heavily toward being renters, but the RBC Home Ownership Survey used for a portion of the data indicates that a majority (61 percent) do indeed own homes. In total, renters totaled 39 (RBC), 76 (Environics) and 41 percent of the respondents. Home ownership was 61 percent according to RBC, 21 percent for Environics and 59 percent for PIAC. The variations in the Environics study are curious, but not discussed by the study authors.

Household Income: Below Average, But Not Poor

Manitoba’s payday loan portrait is decidedly middle-class according to data the study authors present. Using 2001 Census data for the province, the average income for all Manitobans was $58,360. Looking at payday loan customers, PIAC found that the average income level was $51,400 and StratCom (using stats for Toronto in the Ontario province) marked it at $53,480. Environics was considerably lower at $41,376, while StratCom (using Vancouver, British Columbia data) was $42,026.

Education Level: Educated Payday Loan Customers

Using the same sources as the previous indicator, the 2001 Census found that 23 percent of Manitobans had graduated from university, 31 percent had gone to college or vocational school and 24 percent had at least a high school diploma (leaving 23 percent under that education level). StratCom (again for Vancouver) puts those numbers at 16, 28, 44 and 12 percent, respectively. StratCom Toronto clocks in at 26, 36, 34 and a miniscule three percent (more highly educated in urban Ontario, it seems). Environics’ distribution is 21, 43, 20 and 14 percent and PIAC’s is 18, 23 52 and six percent.

Employment: Payday Loan Customers Have Steady Jobs

As stated earlier, 310-LOAN requires that their customers be gainfully employed. While this standard is not exclusive in the payday lending industry as a whole, it is a dominant requirement to which most lenders adhere. Looking first at the general population of Manitoba as surveyed by Environics, we see the following breakdown, supporting the notion that payday loans in Manitoba and beyond are taken by consumers with the ability to repay:

• Employed: 62 percent
• Unemployed: Four percent (very low by today’s standards)
• Student: Six percent
• Retired: 21 percent
• Homemaker: Four percent

The total sample of payday loan customers taken by StratCom (Vancouver and Toronto) is as follows:

• Employed: 89 percent
• Unemployed: Four percent
• Student: One percent
• Retired: Four percent
• Homemaker: One percent

For Environics in Manitoba:

• Employed: 78 percent
• Unemployed: Seven percent
• Student: Two percent
• Retired: Five percent
• Homemaker: Two percent

And finally PIAC:

• Employed: 70 percent
• Unemployed: 10 percent
• Student: Eight percent
• Retired: Seven percent
• Homemaker: Five percent

Why Does Manitoba Use Payday Loans?

Emergency cash and money to cover unexpected expenses are the main reasons given in the PIAC and Environics studies, report the 310-LOAN study authors. Environics also found that consumers use payday loans to avoid bouncing a check. For Environics:

• Necessary Emergency Cash: 36 percent
• Covering Surprise Expenses: 24 percent
• To Cover a Potential Bounced Check: 21 percent
• Short-term Income Shortage: 11 percent
• For Discretionary Purchases: Four percent
• Other: Three percent

PIAC showed similar results, but notice the differences, which are not excluded to the categories PIAC respondents didn’t even cite that did rank in the Environics study:

• Necessary Emergency Cash: 31 percent
• Covering Surprise Expenses: 34 percent
• Bounced Check: Seven percent (why it’s so much lower is unclear)
• For a Major Purchase: Five percent
• Discretionary Purchases: 16 percent (why so much higher?)

When Banks Simply Won’t Do

Speed, convenience, privacy and the ability to handle emergency financial situations were all significant indicators for payday loan customers across multiple study sources. In addition, there is some evidence that suggests some dissatisfaction with traditional banking sources. See the authors’ study for specific numbers. It should also be noted that the studies referenced lean significantly toward “very satisfied” or “somewhat satisfied” for consumer approval level with payday loans and alternative financial services.

What Does a Harsh Rate Cap Do to Payday Loans in Manitoba?

310-LOAN’s study authors attempt to illustrate this is terms of where their own business is in the product life cycle. They claim payday lending is reaching the maturity stage, where saturation in society is relatively high. “In the case of payday loans, as more lenders appear, consumers are more exposed to the product and more inclined to use it,” write the authors. The saturation tends to intensify competition, leading the market toward greater self-regulation of pricing. This competition ultimately benefits the consumer, but the competition must be allowed to reach its apex if they are to fully reap the benefits. That’s the nature of a free-market economy.

Canadian Government Thinks Competition Should Already Be Maxed

Thus, they think rates should have already reached the lowest “consumer-friendly” point. Since they consider rates to be too high (a notion that the average consumer surveyed disputes), governments impose rate caps. It kills payday lenders, but does not kill demand for payday loans.

310-LOAN finds that while payday lending has grown quickly, supply is only now starting to catch up with demand. Their support for this notion is that payday loan industry advertising spending in Manitoba has begun to exceed revenue increases only in this most recent stage in payday lending’s life cycle. Earlier findings (where the supply was lower) wouldn’t need excessive advertising in order to gain customers. Demand provided fuel for growth.

Section 347 of the Criminal Code Has Delayed Saturation

Legal woes for the payday loan industry have slowed growth. This is not to say that the product is illegal; it certainly is not. But enough roadblocks were set up by the Canadian legal system to slow payday loan industry growth. In many cases, it was even a barrier to entry for potential payday lenders. This kept many potential investors away as well.

Competition and Lower Rates: the U.S. Model

The authors cite a Federal Reserve study by Donald Morgan (”Defining and Detecting Predatory Lending“) in which the connection between more payday loan stores per capita and lower rates is made quite clear. This does not mean, as the authors comment on a 60 percent APR cap that some Manitoba lawmakers had proposed before going off the deep end at 17 percent, that such a rate would be sustainable. That’s far from the truth in their estimation. In fact, it had been widely acknowledged that 60 percent is not financially viable for payday loan companies.

“Without an agreed upon method of calculating an unconscionable rate,” write the study authors, “we suggest that the board consider the costs involved in issuing short-term, small sum loans in the market today in order to effectively set the limit on the cost of borrowing.” Using a well-known Ernst & Young study, they note the profit margins for what are considered to be Canada’s “big five” banks:

• CIBC: 23.61 percent
• BMO Bank of Montreal: 27.43 percent
• RBC Royal Bank: 23.26 percent
• Scotiabank: 32.81 percent
• TD Canada Trust: 35.51 percent
  Average: 28.52 percent

Also based upon Ernst & Young findings, the authors note that the rate for issuing a $279 payday loan is $74.08. That’s 26.55 percent for the loan issued, which compares quite favorably with the average banking profit margin above. Based upon the authors’ interpretation of data on 11 payday lenders, such a rate would allow 10 of them to “remain in the market and stimulate and immediate increase in supply and investment in the payday loan industry.”

The Risks of an Excessively Low Rate Ceiling

Allow the industry to evolve in a natural free-market setting, argue the study authors. That will enhance both product and pricing according to consumer need. Set the rates too low and lenders must slash costs wherever possible and abandon efforts to meet consumer need. For instance, allowing for installment loans has proven to be popular with consumers in many locations, but the cost associated would be impossible to swallow for lenders if rates are cut to the proverbial quick. For consumers, there is anecdotal evidence that the convenience of installment loans would outweigh having the least expensive loan possible under law.

Life Dictates Debt, Not Payday Lenders

Situations like job loss, illness and family or other personal difficulties tend to have the greatest impact upon a consumer’s ability to repay short term credit such as payday loans. Yet the Manitoba government (or any government) wants the public to believe that it is the rates of supposedly predatory lenders that cause the problem. Thus, they see rate caps as the only answer. Consumers and even economists do not tend to share such views. Interest rate caps to not solve personal and societal issues; they merely restrict the free market and tend to add trouble rather than subtract it.

You aren’t the only one counting cash until payday

Counting cash until payday has become the new norm. We all have unique situations, but we’re all in the same boat: Ten days until payday and ten dollars in the bank. Sometimes you can scrape by on your last few dollars for an impressive stretch of time. But if one little thing goes wrong before payday – the car breaks down, the water heater stops working, or the dog gets sick – you have nowhere to turn.

Getting cash until payday is worth the cost

Sometimes — even before something goes wrong — it makes sense to get a payday loan to pad your bank account with a little extra cash until payday. The cost of a payday loan can be much less than late fees on a mortgage loan or credit card account. If you care about your credit score, think about getting a payday loan to protect it.

When you’re down to your last few dollars, paying a fee to get a little extra cash until payday is worth it for the peace of mind alone. Get a personal loan today, and if your kid needs something unexpected tomorrow, you’re prepared.

Getting cash until payday is easy

It’s fast and hassle-free to apply for cash until payday at Personal Money Store. Loans of up to $1500 are available and the funds are deposited directly to your bank account, sometimes in as little as two hours. You don’t have to fax anything or drive anywhere and there’s no credit check. On your next payday, the loan is paid back by an automatic deduction from your account. Or if you prefer to make several smaller payments over a longer period of time, you can apply for an installment payday loan.

Getting cash until payday lets you get things done

If you can make your loan payment without having to borrow again, getting a payday loan can make good sense. You have better things to do than count and recount your last ten dollars. With a little extra cash until payday, you just might get them done.

APPLY HERE for Cash Until Payday

(Photo: Wikimedia.org)

I’ve said it before and I’ll say it again: Start your holiday savings now! It’s the perfect time to start your holiday shopping budget (if you have not yet already) and take advantage of hot deals offerings for Black Friday 2009. Tons of Black Friday Ads have leaked on the internet like Wal-Mart Black Friday ads 2009. Although many major retailers have not yet officially released details of their 2009 Black Friday ads it’s obviously getting a lot of people excited. I mean, what’s better than saving money during the holidays?

Before you can settle on any item, however, you must first search and compare different offerings in order to uncover the best Black Friday deals. Like I said earlier, Black Friday Ads 2009 can easily be found on the internet. So avoid the last minute need of a payday loan and start researching!

Wal-Mart Black Friday Ads 2009 – Blackberries Galore!

Get a free $100 gift card on any Blackberry purchase! (Photo via Honou, Flickr.com)

Wal-Mart is not only great for the holidays; it’s the place to go to save money all year long. Wal-Mart Black Friday Ads 2009 have also leaked online and you won’t have to wait till the day after Thanksgiving to get a Black Friday deal. Wal-Mart Black Friday Ads 2009 will fall in effect this Saturday November 14.

Among the best holiday discounts put forth by the world’s largest retail store, Wal-Mart’s Blackberry deals are getting the most attention this year. Wal-Mart is offering a free $100 gift card on any Blackberry purchase with a 2-year contract. Much like Personal Money Store, a place that works through a wide network of lenders to eliminate the traditional hassles of getting a payday loan, consumers will not be limited to one cell phone carrier. You can choose a BlackBerry phone from all four major carriers: AT&T, Sprint, T-Mobile and Verizon Wireless.

Comparing Wal-Mart Blackberry Deals

Okay, so you get a free $100 gift card on any Blackberry purchase. Sounds good. But as a smart shopper, I can’t help but wonder how much money I will actually be saving with Wal-Mart’s Blackberry deal.

Well, according to several news sources, it’s a pretty sweet deal. Here are a few examples from I4U News:

AT&T BlackBerry Bold 9000 Price: $78.88
The BlackBerry Bold 9000 sells on AT&T for $199.99 after $100 mail-in rebate. Amazon charges $39.99 for the AT&T BlackBerry Bold, which is $38.89 less than Walmart charges for it. Overall with the $100 gift card you only save $61.11 on the Bold. On LetsTalk the AT&T Bold is even free with contract reducing the potential savings to $21.12.

—-

T-Mobile BlackBerry Curve 8520 Price: $28.88
The Curve 8520 sells on T-Mobile for $129.99. On Amazon you only pay 1c and the activation fee of $35 is currently waived. With the $100 gift card deal you save here $71.12. If Walmart charges an activation fee you have only saved $36.12.

Who needs a payday loan at this rate?

Wal-Mart Wireless on High Demand

People go to Wal-Mart for one thing: To save money. At Wal-Mart, you can find everything from the cradle to the grave… literally. Wal-Mart is now offering cheap caskets online in case you didn’t know. It’s clear, however, that Wal-Mart wireless is what’s causing the hype this year. They’re sweet phones with sweet prices. Wal-Mart Black Friday Ads 2009, however, highlights a lot more than just Blackberries. So start researching for the hottest Black Friday 2009 deals for all your holiday needs.

What does it mean to need money now? Does it mean that the $625 Gore-Tex ski jacket with hooded hard shell and waterproof zippers you’ve been wanting has just been marked down? Does  it mean that tomorrow is the last day to book a $499 super-sale vacation to Grand Cayman? Does it mean that of course you could schlep your laundry across town to the Laundromat until payday, but you’d rather fix the washing machine right now?

Or does needing money mean that you have $50 to your name, you owe the electric company $325, you’ve already gotten an extension, and your service is scheduled to be cut off three days before your next payday? Different people would have different answers.

Who decides if I need money now?

People could argue endlessly about what it really means to need money now. But a reasonable person won’t take issue with the fact that every reasonable person is uniquely qualified to make that judgment for him or herself. If you’re thinking about getting a payday loan to reserve a bargain Caribbean vacation package — yet you would never consider getting a loan till payday just to fix the washer – you are in the best position to judge for yourself what it means to need money now.

But if you’re that person whose electricity is about to be cut off, you definitely need money now! And if you apply right now, you can probably still get cash today.

Is it easy to get a personal loan?

If you need money now, it’s quick and hassle-free to get a payday loan online. There’s no credit check and no need to fax anything. Payday loans are available in amounts up to $1500, and you’ll know right away whether your loan request is approved. Funds can be deposited directly to your bank account, sometimes in as little as two hours. Most payday loans are paid back in a single payment on your next payday, but sometimes you can qualify for a payday installment loan that lets you make several smaller payments over a longer period of time.

Does it make sense to get a personal loan now?

No matter what kind of payday loan you apply for, keep in mind that you can dig yourself into unmanageable debt very quickly if you plan to pay off one loan by getting another. Short of doing that, if you need money now and can still make ends meet after paying your loan back, this is the time to apply.

Do not discriminate! So long as he draws steady income, some payday loan companies don't care if that income comes from an employer, the government or court-ordered support. (Photo: flickr.com)

At Personal Money Store, one of the primarily qualifications a consumer must meet in order to receive a payday loan is that they must be actively employed for a pre-determined length of time. It’s an indicator of steady income, which traditionally signifies that the consumer will be less of a financial risk in that they’ll have the money to pay back their loan. It’s also a safety measure for borrowers, in that only those with consistent income – or, to be more precise, a sufficient level of livable income – will be allowed to enter into a contract with a payday lender in the network to which Personal Money Store has access.

However, desperate times may indeed call for desperate measures on the part of some major payday lenders. That’s what a KEPR 19 story out of Pasco, Washington indicates. The CBS affiliate found that not all payday loan companies require the consumer to be drawing a paycheck. In the Tri-Cities area (of which Pasco is a part), the answer to whether consumers could get a payday loan with an unemployment check as their only source of income was “Yes.”

As in, “Yes, We Do Not Discriminate as to Income Source”

Moneytree, Check into Cash and Advance America (three of the top payday loan companies in America) told KEPR Action News that they would not only cash a consumer’s unemployment check, but would issue them a short term loan based upon that proof of income. Thus, “you don’t even need a payday to get a ‘payday loan,’” says KEPR.

Advance America says they accept such proof of income because doing otherwise would be discriminatory. The federal government does not allow traditional lenders to discriminate based upon an applicant’s source of income, so “non-traditional” payday lenders are following suit. However, Advance America did acknowledge that “only a small percentage of clients are using unemployment checks for loans.”

Sandbagging Before the Storm?

Whether you’re talking unemployment, social security or even child support, some payday loan companies will say yes. This could be because the state of Washington is preparing to make life more difficult for payday lenders and the consumers who use their products. In 2010, the maximum amount a Washington resident can borrow will be $700 (not to exceed 30 percent of total monthly income). In other bad news, payday loan customers will be entered into a database used by state lenders. The purpose of this database will be to prevent consumers from taking more than eight payday loans in a single year. While this could protect some consumers, it could also be argued that the lack of privacy and the nanny state mentality behind such a database doesn’t make for a more financially independent society.

Baby Me, Lawmakers

At what point did Americans lose sight of the values of educating oneself and making appropriate decisions based upon one’s own knowledge? Now it’s apparently OK for government to educate consumers through nanny state regulations. Make it harder for consumers to get payday loans – because you’re TEACHING them! Brilliant! Put the cookies on top of the fridge and schedule nap times while you’re at it.

Setting limits and guiding children is one thing… but administering the same treatment to adults is completely inappropriate. People must be given the chance to learn and save THEMSELVES.

“There’s always ways around it, but I do think that if nothing else they’re going to put up hurdles to jump a little higher and try harder and maybe that will make the consumer wiser,” said Yvonne Fengler of Consumer Credit Counseling in reference to Washington’s payday loan laws.

Some People Can’t Put Down the Cookie Jar

And that has never been the cookie jar’s fault. The minority of payday loan customers who do create unmanageable debt for themselves through short term loans make for sensational news copy. They owe large amounts and the media feigns sorrow as they cry along to stories that are indeed sad. Yet such sloppy journalism is like a sugar cookie: tasty, but far from nourishing.

Don’t Follow Oregon’s Example, Washington

Oregon has placed a hard 36 percent APR rate cap on payday loans, and mandated that consumers have 31 days to repay (rather than the two weeks that is standard in the payday lending industry). Studies indicate that this harmed the financial welfare of credit- liquid asset-constrained consumers in the state. Washington can do better for its residents, whether they are employed or not.

Payday loans in Ohio still exist, but the opposition continues to bulk up for the next battle. (Photo: Wikipedia.org)

The battle for payday loans in Ohio has been a difficult one for consumers. The recession hit the Ohio workforce harder than most, and the need for emergency short term loans is greater than ever before. Yet the state legislature in their infinite wisdom decided that what their constituents needed was nanny state regulation. Rates were capped at 28 percent APR, which effectively crippled the industry in Ohio and sent credit- and liquid asset-constrained consumers scrambling toward more expensive options. That rate is more stringent that the federal rate of 36 percent APR set for lending to active military, and we know that even at that level, the business model in unsustainable.

Payday Lending is Now

Consumers desire the flexibility to choose what is best for their financial situation. The Columbus Dispatch, rather than turning away from this point in order to blow with the political wind, recently produced an article that was pleasantly even-handed. For some, it’s true: payday loans are “the only way to get by.” While no reputable lender would advocate payday loan dependency, it’s been proven not only in customer surveys but in studies conducted by the Federal Reserve and institutions of higher learning that payday loan can be an invaluable tool for smoothing out financial shocks.

Choice is Good

CheckSmart CEO Ted Saunders pointed out to the Dispatch that “There is a bank right there,” in reference to a traditional institution just a football field away from one of his stores. “They could go right there if they wanted to.”

Competition fosters choice. It also tends to help regulate prices, both of which are benefits to the consumer. But activists like Bill Faith of the Coalition on Homelessness and Housing in Ohio (COOHIO), who appears to be a firm believer in the nanny state, reminds that “People at one point also were excited about high-interest subprime mortgage loans that helped ruin the housing market.” Yet Faith makes an apples-to-oranges comparison. Wall Street shenanigans and impotent governmental policy that allowed it to go on are what destroyed the economy. Payday loans aren’t even in the same ballpark. In fact, studies like those by Dartmouth College’s Jonathan Zinman suggest that capping payday loan rates and otherwise restricting the industry harms consumers’ financial welfare.

Don’t Believe? Ask Somebody Who Has Used Payday Loans

The Dispatch interviewed Amie, a 47-year-old mother of six. Recessionary times have been tough for her budget, and her low earnings make getting ahead almost impossible. Even though she’s found herself jumping from one payday loan to another, she said “I can’t complain. At least they’re helping me,” referring to CheckSmart in Ohio.

That’s ammunition that payday loan critics would use to say that companies like CheckSmart are pulling Amie into an endless cycle of debt. But what we truly have here is a financial landscape where banks, credit unions and even employers have for the most part failed to serve the populace. Requirements to apply for consumer loans through old-school channels often exclude those who need the most help. As wages have not kept pace with the rise of inflation, too many consumers like Amie find themselves in a large hole.

Legislation: Like an Ant Lion’s Hole

Legislators who fight for 28 percent APR and other such unreasonable restrictions upon businesses without the deep pockets of the financial mainstream are creating a nanny state scenario where consumers with nowhere else to turn will have to depend upon the “alms” of the government and their banking tentacles. Freedom of choice sinks beneath the waves. Or, if the government does not assert total control and credit-restricted consumers are left to fend for themselves, regulating payday loan companies out of the market most frequently leaves consumers with even more expensive options, from loan sharks to overdraft fees. At least payday lenders make their costs clear up front. That’s something a bank never does with overdraft fees. If you’re skirting the red, using an ATM card becomes a deadly game, as every infraction can incur a fee of $25 or more, even if you overdraw your account by as little as one penny. But that’s OK, says banks. It’s all in the micro-fine print!

“Banks and other lending institutions aren’t doing their jobs,” says Koziura

That’s what House Financial Institutions Committee chair Rep. Joseph F. Koziura of Lorain, Ohio told the Dispatch. “The system is built on making money on fees now instead of the old-fashioned loaning money and putting money in the system. That’s 90 percent of the reason we’re screwed up.”

What happened when half of Ohio’s 1,600 payday lending outlets closed down after approval of a 28 percent APR rate cap? Lots of people hopped into the unemployment line, for one. Consumers kowtowed to the voice of government and made life more difficult for those who can ill afford such windmill chasing. There were certainly some payday lenders who were unscrupulous in their dealings with customers, but it was not a majority. Payday lending is a regulated industry with a keen eye toward consumer relations. Groups like the Community Financial Services Association and the Online Lenders Alliance are there to ensure that consumers can safely enjoy the use of payday loans.

But Payday Lenders Aren’t Being Allowed to Run Legitimate Business

Charging $15 per $100 loaned is common for a payday loan. For a two-week loan, paying 15 percent interest is reasonable for an emergency service that can expose the lender to a great deal of financial risk. But Ohio legislators managed to convince consumers (lead the lemmings?) into laws that prevent payday lenders from even doing that. According to the Dispatch, CheckSmart charges up to that rate, but it’s broken down into numerous fees in order to circumvent faulty legislation. It gets around the 28 percent APR rate cap as it currently exists. And CheckSmart makes each of the individual fees clear to its customers, who continue to use their services. The truth is what consumers want, not horror stories that leave you thinking, “Yeah, that really doesn’t happen to most people.” No hook hands scraping the door at midnight, no dolls that move on their own and no payday loan debt traps… that’s story time, kids.

Legislators Still Aren’t Satisfied

Ohio legislators are continuing to drive for a 28 percent APR rate cap that applies to any payday loan and closes the loopholes. “The latest bill up for debate in a House committee,” writes the Dispatch, “would cap interest at 28 percent for all loans of up to $1,000 made for a term of three months or less.” That would kill payday lending in Ohio. A vote is set for early December.

Payday Lending: A Tool to Be Used with Healthy Caution

Payday lending is not a magic ATM. It isn’t money to fulfill your wildest cash desires at a moment’s notice. Such unbridled use can easily lead to dependency, when what a consumer’s finances need is sound budgeting. But regulating payday lending out of business in Ohio because a minority of consumers use the payday loan product in ways it was not intended to be used is no answer. If people fear the nanny state when it comes to bailouts and healthcare, shouldn’t they also fear it in this avenue of consumer finance?

Speaking of government, there’s an invention called Social Security. While it has been a cash lifeline for some, many others worry that it may be a financial scam, a Ponzi scheme that is costing the modern workforce millions each year. Yet legislators make no earnest attempt to reform that system. They consider payday loans a more desirable target, perhaps? There might just be more of a campaign war chest in that field, thanks to the banking industry. Vote as the dollars go; isn’t that the way?

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Photo: http://www.flickr.com/photos/azadam/ / CC BY-SA 2.0

Back in the 1950’s, women from across the nation went berserk over the conical bras, which were made popular by stars like Marilyn Monroe and Jane Russell. Now the pointy conical bras are making their way back on the market, screaming with high demand, and you might need a payday loan to fund this feminine look. It could cost up to $150 for a single conical bra.

Personally, I don’t like how pointy the conical bras are. It looks a bit, well, deformed. It almost looks like you went under the knife and the plastic surgeon  earned his surgeon degree at the Coneheads University located on the planet Remulak. I don’t quite understand why this trend is making a comeback. Sometimes it’s good when history repeats itself, but I think I’ll take a rain check on this one.

Forget About Those Padded Bras – Get a Conical Bra!

According to UK’s Daily Mail, apparently more women are ditching the padded bras for a more playful look. One of UK’s favorite retailers, John Lewis, revealed a whopping 33 percent increase in conical bra sales.

“I think we’re selling more conical bras as customers take influence from designers such as Louise Goldin, Jean Paul Gaultier and Dolce & Gabbana, who have rediscovered the bra as outerwear in their spring/summer 2010 collections.” said John Lewis’ head buyer of lingerie and swimwear, Helen Spencer. “Sales have shown that women are no longer hiding their breasts under minimiser bras but embracing their assets and using them to their advantage.” And just when I thought she was crazy, Spencer added, “But when I do a quick straw poll, almost everyone agrees that while it’s an eye-catching look, it’s just not sexy.” Amen sister.

Conical Bra – Not the Bra for me

Thank goodness I’m not the only one who has conflicts with conical bras. There is only one reason why women would buy something like a conical bra: To attract the opposite sex. That’s what lingerie is for, right? So if it doesn’t look good or feel good and your hubby doesn’t find it sexy, why waste a payday loan on conical bras? I’d rock a coconut bra over any fancy laced conical bra any day.

It’s easy to get a personal loan today

No one likes the thought of borrowing money. But most of us have had to do it at one time or another. Especially today, with the cost of living soaring and incomes dropping, sometimes you have to get a personal loan just to make ends meet. If you get a personal loan today, and know that you’ll still be able to get by on your next paycheck after paying the loan back, a quick payday loan can solve a lot of problems.

Sometimes it makes good sense to get a personal loan

Needing money means different things to different people. You might be struggling to get by until payday after an uninsured medical emergency. You might be completely out of cash until payday when your car breaks down. You might be piecing your finances back together after overextending them on a recent vacation. You might even own a good house, have a good job, drive a nice car, be current on all your bills, and still find yourself short of cash until payday. Whatever your standard, and whatever your reason, when it makes sense for you to get a personal loan, Personal Money Store is the best place to find one.

Sometimes you can cut your losses when you get a personal loan

When you’re short of cash until payday and are running the risk of late fees or bounced check charges, it can make sense to get a personal loan. Late fees on the rent or mortgage can be significant, and it can cost hundreds of dollars to reconnect the electric service. Credit card companies today are more determined than ever before to collect late fees. Being just one day late on a charge account can really set you back when you’re already scraping to make ends meet.

No one loves to borrow money. On the other hand, there are bigger fees to pay than the price of a quick payday loan.

Anyone who’s ever had to get a personal loan knows what it’s like

Even with the economy in shambles, there are plenty of people who’ve never had to get a personal loan. But there are plenty more of us who struggle to make it from paycheck to paycheck. We know what it’s like to need money so badly that you’re willing to get a personal loan just to get by for a few more days until payday.

Get a personal loan for peace of mind

When you know that you can pay the loan back on payday without having to borrow again, and it feels like a little money in your pocket will change your whole life, paying a few dollars to get a personal loan is worth every penny. You may save money and you may put food on the table; you may make the landlord go away and you may get your car out of hock; but sometimes the peace of mind alone is reason enough to get a personal loan.

Applying for a personal loan is easy:

Is this person singing the inner city blues over payday loans? Don't bet that it's that simple. (Photo: flickr.com)

Have you ever heard that statement before – that “correlation does not imply causation?” What it means is that even if one can identify a correlation (strength and direction of a relationship between two random variables), it does not automatically imply that one causes the other. Making such a connection is falling prey to a logical fallacy known in Latin as cum hoc ergo propter hoc, which translates to “with this, therefore because of this.”

People falling prey to a logical fallacy in conversation is one thing, but if a logical fallacy is central to the argument in a published academic paper that is attempting to shape public opinion and even advise lawmakers as to procedure, the work becomes irresponsible and even harmful. Such is the case with a recent intercollegiate study by Charis Kubrin and Gregory Squires of George Washington University and Steven Graves of Cal State Northridge entitled “Does Fringe Banking Exacerbate Neighborhood Crime Rates? Social Disorganization and the Ecology of Payday Lending.” Through the use of a logical fallacy, the authors attempt to link the rise of payday loan companies in middle- to low-income neighborhoods in Seattle, Washington with increased community violence. As if there could be no other contributing factors (which is something the authors even concede to more than once during their study, completely invalidating their previous hypothesis).

First, the Pro and Con Payday Loan Arguments

As we’ve heard many times before, those who are against payday loans claim that the businesses exploit the underprivileged and the uneducated. Supposedly, they cause poverty and an endless spiral of debt. On the other hand, supporters indicate that payday loans address a particular need for those who experience short term financial difficulty and are credit constrained and have little or no liquid assets to help deal with the problem. For every study that claims that payday loans cause bankruptcy, there are studies that indicate to the contrary regarding payday loans. Furthermore, numerous studies regarding the profitability of payday loans indicate that the rate charged is justified by the risk involved and that payday lending outlets do not reap excessive profits.

Causing Cities to Tear Themselves Apart?

The study authors take the angle of payday lending being an agitating agent that brings out the worst in the communities where brick-and-mortar stores are present. They see greater instances of crime in areas of Seattle where payday loan store penetration is most concentrated as a previously unstudied “price” that the communities pay for allowing the presence of payday lenders. The authors state that because payday loan stores operate with late and weekend hours – when hoodlums supposedly are out in force? –there is a greater potential for violence. Whether it is the stores themselves or their customers being subject to robbery, the authors would have us believe that providing consumers with payday loans when said consumers’ access to traditional forms of credit is restricted and short term financial need is great is somehow the fault for the violence. By that same logic, wouldn’t ATM machines, banks, liquor stores, gun stores or any other place where money is kept be a potential instigator of violence? It’s ridiculous. Capitalism should either be allowed to work as it can or American society should be dramatically restructured along the dreaded socialist lines that so many Americans claim to fear. Having payday lending outlets in your neighborhood is no more the cause than any other business where money is exchanged.

Why Seattle? Why Payday Loans?

The authors hold up Seattle as being representative of a typical large U.S. city, which sounds reasonable, but they admit that it may not create an accurate picture of the supposed payday loans/violence link for American as a whole. The Seattle communities with the greatest instances of violence in the authors’ study tended to be those where poverty was greatest. So are they saying that because payday loan outlets may be present in or near such communities that the payday loan outlets were the cause of the poverty – or the violence that stems from human frustration and need? That’s a very simplistic view that does not exist upon a well-reasoned, logical framework.

But Texas Payday Loan Customers Only Make $18K Per Year!

I’m not aware of the methodology of the Fox study that the authors cite for Texas payday loan customers, but the results seem highly unlikely (or need much greater clarification). Personal Money Store has found that the average online payday loan applicant makes $31,690 per year. For those approved for payday loans, that rises to $36,000. For those denied, it only falls to $30,672. It is indeed suspicious that there could be such a disparity between those results and those in Texas, but such questions could be indicative of the kind of care in research that the authors used in studying Seattle communities.

Repeat Customers: Beaten Down Victims?

Referring to other studies, the authors make the claim that as much as 60 percent of payday loan customers frequently and quickly borrow again. Personal Money Store customers don’t follow that model at all. Since only 4.64 percent of visitors to the site return and 7.36 percent of applicants are return visitors, it certainly doesn’t support the idea held by the authors that payday lending organizations create financial stress by hooking customers into an endless cycle of debt. It is implied that the stress such a situation could theoretically cause is in turn the flash point that spurs people in the Seattle communities to violence and violent crime. Illicit drug use and abuse, domestic violence, robbery and related crimes have what nearly any sociologist or psychologist would tell you are a complex chain of causes. The presence of payday loan stores in a community – once more – is too simplistic an answer.

Explain it Away, Social Disorganization Theory

The authors use the Social Disorganization Theory to attempt to explain their preconceived connection between the presence of payday lending and community violence. “According to the theory,” they write, “certain neighborhood characteristics can lead to social disorganization, defined as the inability of a community to realize the common values of its residents and maintain effective social controls.” Such social disorganization is the root of crime, according to the authors.

What role do payday loan stores play in the characteristics of a community? Do they structure the daily routines of residents, as the theory would require? The bulk of payday loan customer survey respondents say they use the product to help with an emergency expense, and that this hardly represents a daily occurrence. But more importantly, you cannot assume that one institution is responsible for a social problem. Bars, low-income housing and liquor stores tend to appear in distressed neighborhoods as well, but their financial import to the economic health of said communities is very real. The arguments that liquor stores and bars promote alcoholism or that gun stores promote violent crime will always be on someone’s mind, but that doesn’t make the arguments valid. The connection between payday loan stores and violence/violent crime is even more tenuous.

Build More Community Centers and Libraries

The authors (as well as many others) find that such institutions contribute positively to a community’s identity. Perhaps a lack of sufficient community resources along these lines would be a greater indicator of social disorganization? It’s no stretch to say that the community that is fragmented and the community that doesn’t spend time together would be more prone to communication breakdowns that can lead toward violent confrontation. Stifling market competition by singling out payday loan stores – not to mention robbing disadvantaged consumers of a choice that can genuinely help in the short term – is hardly a way to organize a community in a healthy manner.

While you’re at it, why not install greater security measures in areas where consumers are walking away with large sums of cash? This could be considered a failing of payday loan companies in at-risk communities. With proper security measures, perhaps robbery numbers would go down. If people know there’s a greater chance that they will be caught, they’re much less likely to commit a crime.

Payday Loans and the Drug Trade

Having cash on hand tends to be a prerequisite if an individual wishes to purchase any form of harmful street contraband. However, such behavior should never be encouraged. Payday loan stores certainly do not do so simply by nature of them providing cash to their customers. Banks do the same thing – even ones in less than reputable neighborhoods – but they are not being accused by the authors of this problematic study. Where’s the balance there?

Where the Need is Greatest

“The safest neighborhoods in Seattle have no payday lenders in them,” write the authors. There are many reasons this could be the case. Perhaps the larger, more established traditional banking industry in Seattle has effectively swayed local politicians into pushing their payday loan competition out of high-rent neighborhoods. It certainly wouldn’t be unheard of in big-city politics. What consumers in lower-income neighborhoods tend to face are situations where their restricted access to credit makes qualifying for traditional bank loans next to impossible. Hence, having payday loans they can qualify for in their own neighborhoods constitutes a great service.

Some critics would argue that big banks and credit unions are beginning to offer their own alternative to the payday loan, making those outlets obsolete. However, that’s just in theory. In execution, banks who participate in such programs admit that they do so at a loss. Their real goal – stated by none other than the FDIC – is to transition consumers into other products like overdraft protection and traditional loans. Is it any coincidence that these products can be much more expensive for consumers?

Property Values Go Down Because of Payday Loans?

Of course the authors claim that payday loans are the culprit in those at-risk communities. But remember, correlation does not imply causation. To assume that payday loans are the reason why is to be unintentionally simplistic at best, intellectually dishonest at worst. There are many factors that can contribute to a drop in property values. Many of them are beyond one’s immediate control.

The Effects of Over-Regulation

The study authors challenge lawmakers to enact policies to help control the “blight” of payday loan store presence in American communities. Capping the annual interest rate at 36 percent is one idea, which the federal government has already instituted on loans to active military. However, considering the costs of operating payday loan stores, being allowed to charge less than $2 per $100 loaned for the standard two-week payday loan duration is not enough to keep such businesses open. The result of removing the distressed consumer’s ability to choose payday loan credit is to drive them toward more expensive or even dangerous alternative. I’d like to see the authors connect those alternatives, from loan sharks to other illegal activities, to the violence they claim surrounds the payday lending industry.

Widen the Net for More Meaningful Results, Please

“An obvious extension of this research would be case studies of additional cities,” write the authors. “We suspect our findings are not unique to Seattle. But there may be variations associated with the size, demography, regional location, industrial structure, and other city characteristics that affect the linkage between payday lending and crime.” No, I’d say those factors could be some of the real causes of the violence you’re studying – rather than additional links between payday lending and crime. The authors suggest that further study in the matter is needed to fully understand the supposed connection. I’d agree that further study is needed, but that study should be based on sound reasoning and logic, rather than a logical fallacy. Politicians are easily swayed by things that resemble facts but are in reality statistical noise. On the count that their work could contribute to such institutional delinquency and laziness, Kubrin, Squires and Graves’ theory regarding payday loan stores and violence is irresponsible.

Payday loans are loans that are offered for a very short term to help people manage their unexpected expenses. Though there are numerous publications and articles in various forms of media propagating the ill effects of these loans, the truth about them cannot be hidden for long.

Instant payday loans offer people the benefit of managing their expenses successfully without falling prey to poor credit rating. This loan option is especially beneficial for the people in the lower and middle working class living on a fixed income. There are many priceless advantages of these short-term, instant payday loans.

Maintain a Good Credit Standing

A good credit score and report can do endless good for you. Your credit score tends to drop if you are unable to pay your bills on time. This, in turn, poses problems for you while trying to secure a home loan or car insurance.

In certain cases, a poor credit rating can have a negative bearing on your job. In order to avoid all these issues, you can get payday loans with minimal paperwork.

Provides Instant Cash

There are many times in our lives when we are faced with certain unexpected situations in which we will need instant flow of cash. The instant payday loans prove to be a boon in such situations.

They provide you with much needed cash right away, thus helping you ease out of your difficulties. This will also come in handy when you have to pay off your credit card bills in order to avoid hefty late charges.

Ease of Application

Instant payday loans are easiest to apply. You can apply for these loans either over the phone, place a request online or pay them a personal visit. The payday loans save you the time and effort of running from one lender to another looking for the one who is ready to give you the money in your hour of need.

There is no necessity to meet your financier directly in order to obtain this loan. There are no upfront costs or processing fees to be paid while obtaining these loans. Once you apply for these loans, most of the time, the money will be credited to your account in a matter of hours.

No Collateral Needed

One of the prime benefits of opting for instant payday loans is that you don’t need to provide any collateral or security in order to obtain the cash advance. There are minimal criteria that need to be met in order to qualify for this type of loan. One of the basic criteria to be eligible for this loan is that you need to be 18 years old. Another criterion is that you should have a steady source of income and valid bank account.

With so many benefits, it is no wonder that instant payday loans are gaining prominence by the day.

Payday Loans have the green light when it comes to going where the financial need is greatest. Access to conventional credit plays a large role. (Photo: flickr.com)

Payday loans are an inescapable landmark in America’s modern economic landscape. The popularity of the short term loan product has grown significantly since the early 1990s, and it’s no wonder. Giving consumers the ability to absorb financial shocks in the short term – enabling them to avoid hefty penalties – is useful for maintaining economic welfare. It is important for consumers to be educated as to their alternatives in a financial emergency, however. For their part, the payday lending industry (organized under such groups as the Community Financial Services Association and the Online Lenders Alliance) has helped to educate consumers as to how payday loans work and when they should or shouldn’t advisably be used. However, the responsibility rightly rests with the individual.

Unfortunately, the image still persists within the popular media that payday loans are an instrument through which unscrupulous businessmen and women exploit “at-risk” members of society. One of the primary means these critics use to attempt to prove their point is by focusing on the geographic clustering of brick-and-mortar payday loan locations (as well as pawn shops and check cashing outlets). This fails to take into account online payday loan companies and aggregators like Personal Money Store, whose average customer by income tends to fall comfortably into the middle class. However, when brick-and-mortar locations only are considered, a clear pattern of going where demand is greatest becomes apparent. A recent study by Robin Prager, the Assistant Director in the Division of Research and Statistics for the Board of Governors of the Federal Reserve System, supports the assertion that payday loan businesses tend to cluster in areas where access to credit may be restricted and liquid assets that help consumers handle financial surprises may be closer to scarce than abundant.

“Determinants of the Locations of Payday Lenders, Pawnshops and Check-Cashing Outlets“

Prager groups payday loans, pawn shops, check cashing and a number of related short term loan companies under the name “alternative financial service providers” (AFSPs). Recognizing the controversy the rapid growth of these institutions has generated, Prager analyzes the geographic placement of AFSPs. Using county-level data for the entire country, she expands upon the regional work most studies had undertaken before. Demographics, population, consumer credit profiles and the degree of strictness in state and local laws all play a role in where the largest clusters of AFSPs appear.

Rules and Regulations Facing AFSPs

Payday lending, pawn broking and check cashing aren’t overnight sensations. They date back to at least the 1930s, although payday lending may date back to Colonial America and pawn broking in its various forms is particularly ancient. As with any explosive growth industry, there has been a need for regulation. AFSPs are subject to regulations on the federal, state and local level. Such things as the Gramm-Leach-Bliley Act, the USA PATRIOT Act, and the Bank Secrecy Act all have jurisdiction. Moreover, all loan companies must follow the federal rules of the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and the Talent-Nelson Amendment to the 2007 Defense Authorization Bill, to name a few. On the state and local level, numerous and variable other regulations exist. It’s safe to say that a regulatory maze exists when it comes to AFSPs. While they do serve to protect consumers against potential exploitation, the question as to whether over-regulation has stifled competition with the consumer financial services industry is a more than legitimate area for study.

Urban vs. Rural Distribution

Prager found that in 2006, 98.9 percent of rural and 99.6 percent of urban counties in the U.S. featured at least one bank or thrift branch. Furthermore, two-thirds of rural and 90 percent of urban counties had at least one AFSP provider (payday lender, pawnshop, check casher, etc). Considering population by county, the average of 33,000 people were serviced by 2.5 payday loan stores, 1.2 pawn shops, 1.7 check-cashing outlets and 10.7 bank and thrift branches. On the urban side, the numbers change to 220,000 people, 16.6 payday loan stores, 7.4 pawnshops, 21.2 check cashers and 67.5 bank and thrift branches. AFSPs like payday loan companies are certainly not more prevalent than banks in Prager’s sample.

Where Do the Payday Lenders Congregate?

Prager found that the highest concentration of payday loans outlets on a per capita basis came in southern states where regulation is more forgiving: Alabama, South Carolina, Tennessee, Mississippi and Louisiana. Pawn shops concentration was also high in such areas (primarily Alabama, Mississippi and Tennessee), although check cashing ranked highest in California, Delaware, Mississippi and North Carolina.

Banks and thrifts found their highest concentration in the north central states, including Kansas, Nebraska and North Dakota. This did not tend to correlate into having a negative effect on the number of pawn shops and check cashing outlets in a county, but Prager did find a positive correlation when it came to payday loan stores.

Credit Scores Point to Subprime

Here is where we get to the heart of the matter with AFSPs like payday loan stores. They tend to appear where the need is greatest. If consumers have difficulty security mainstream credit in an emergency, then payday loans become a very attractive option. Prager introduces an equation that factors credit availability and a variety of other factors in order to express the number of AFSP outlets as a function. It is a function of the following demographic data: racial/ethnic mixture, age, consumer education, poverty standing and the county’s population density. As stated, creditworthiness and area regulations are also factors.

Here are some of Prager’s comments on results:

Looking first at the equations explaining the number of payday loan stores per million capita, we see that the results are fairly similar for urban and rural counties. In both cases the number of payday loan stores per million capita is negatively related to the share of the population that is Hispanic, positively related to the share of the population that is non-Hispanic black, and unrelated to the share that is Asian. Payday lenders are more prevalent in both urban and rural counties where a larger share of the population is below the age of 40 and less prevalent in both urban and rural counties where a larger share of the population lives below the poverty level. The number of payday loan stores per million capita is significantly related to the share of the population with a high school diploma (negative sign) and population density (positive sign) in rural, but not urban, counties.

Patterns in Payday Loan/AFSP Placement

Prager recognizes a few general patterns: 1) Payday lenders/AFSPs appear in credit challenged areas; 2) But they tend to avoid areas where the poverty level is highest; 3) AFSPs and other payday loan businesses aren’t seen to be particularly concentrated in Hispanic regions; 4) Payday lenders do tend to appear more in the African-American community; 5) population density and payday lending presence are connected in rural areas, but not as much in urban; and 6) Not surprisingly, areas with tighter regulation show a much lower instance of payday loan companies.

Payday Lenders Do Not Prey on the Poor

This is what Prager found based upon county-to-county data and it runs contrary not only to what the mainstream media would have you believe, but to the findings of a number of past studies. Credit scores remain a prime factor in distribution of AFSP. Going where the need is greatest is an idea that holds up in this instance. Mainstream credit may be less expensive on average, but if a consumer does not have the credit to access such a thing, then payday loans are the best options. As federal, state and local governments devise new ways of continuing to limit the industry, what exactly do they think credit-challenged individuals are going to do? If sinking beneath the waves of poverty so that they’re “out of sight, out of mind” is a feasible solution for elected officials, then perhaps people who can display more reason and human compassion deserve a turn.

Apply for Payday Loans here!

Does Your Budget Need a Boost?

A payday loan can be like a financial workout for your budget when the numbers are looking flabby. (Photo: picasaweb.google.com)

Financial difficulties are commonplace today. You may be experiencing difficulties yourself. If so, a payday loan could be the exact boost to gain complete financial fitness. Payday loans were designed to help bridge the gap between current cash needs and future cash inflows. If you are experiencing an imbalance and need fast cash, a payday could be right for you.

There are ways to work out your financial difficulties without asking friends or family! A payday loan application takes only minutes and you can have cash in hand within hours. Apply, go see a movie, then pick up your cash!

How’s Your Current Financial Fitness?

It’s a bad sign if you are making payments over 30 days late, or not paying at all. Resulting collection calls are a very bad indicator as well. Another sign of poor financial fitness is losing sleep at night. This time of year, many people are worried about making it through the holidays – paying for airfare and lodging, buying gifts, etc. These are indications you are currently not financially fit. Perhaps it’s time to work out your finances with a payday loan?
Your financial fitness is very similar to your physical fitness. For starters, you can’t simply do nothing and expect results. If you want to be fit, you’d have to be insane to think you don’t need to work out and eat properly. For financial fitness, your job or business is your workout and money is your nutrition. You need cash to build those muscles so you can get stronger and make even more money in the future.

Don’t Work Out Without a Spotter

It is ill-advised to pump iron without a spotter. Trying to get through this world without enough cash is much the same. A payday loan can be your spotter to make sure you don’t drop those heavy bills and hurt yourself. To work out your finances, you need a payday loan. Take your financial fitness seriously. Stop sitting on the couch eating potato chips and expecting results. Do something now!

If in addition to financial fitness, you are looking for physical fitness, you’d be crazy to not consider the Insanity Workout. Shaun T will whip your butt into shape like never before.

If your finances could use a Payday Loan Workout, APPLY HERE!

(photo courtesy of flickr.com)

A quick loan can relieve short-term financial crises, but here’s the next crisis: the loan has to be paid on your next payday, which can leave you strapped for cash again. Then you get another short term loan to pay off that loan, and so forth until you are mired in a payday loan mess.

If you’re having trouble making ends meet, perhaps an installment payday loan would work better for you. Installment loans allow you to make several smaller installments and spread them out over a longer period of time, rather than having to pay the loan off in one payment.

One loan is better than ten!

Loans of any kind can be stressful. Using a major portion of your pay check on your next payday to pay off a loan can lead you to request an extension of the loan – which costs more money — and apply for another loan – which also costs more money — and so on, until you have several unpaid loans, and insufficient funds to pay them.

Payday loans have a legitimate purpose when you’re living from paycheck to paycheck.  But if you want to avoid this trap, think about your goals before you apply for a loan. Analyze your budget to see if you can actually afford to take out a loan.  Ask yourself whether you really think you can get by on your next paycheck after paying back the full amount of the loan.   If the answer isn’t a resounding “yes,” then consider applying for an installment payday loan.

Installment loans are available in amounts of up to $1500. In many situations, installment loans are easier to pay back than single-payment loans.  You still have the convenience of the payments being automatically deducted from your bank account, but the payments are smaller and easier to handle.

How do I get an installment loan?

Applying for an installment loan has never been easier. Online applications are now so streamlined that you know within minutes whether your loan request is approved. All you do is fill out a short application, which only takes a couple of minutes.  If loan request is approved, the funds will be deposited directly to your bank account, sometimes in as little as two hours.

Am I eligible for an installment loan?

Installment loans have certain eligibility requirements, which differ from lender to lender.  Sometimes a lender will require that you have successfully obtained and repaid a certain number of single-payment payday loans before you can be approved for an installment loan.  Other general requirements include that you must be 18 years of age, have a regular income, and have a bank account.

But borrower: Beware!

Repayment of the loan is an important consideration. Before you accept any kind of payday loan, make sure you read everything and understand the terms and conditions of the loan.  Different lenders have different loan agreements. Remember that it is your responsibility to read the fine print.  If you find yourself unable to make a payment, contact your lender before the payment is due.  You may be able to reschedule the payment date and avoid a default on the loan.

Apply for Installment Loans HERE!

Image from Flickr.

It’s true, you can’t be thrown in prison for 10 years for robbing a cash advance loans store. However, the situation is different if you have already served time for robbery before. A man who robbed a payday loan store in Minnesota at gun point has been sentenced to 10 years in prison followed by six years of extended supervision.

There are a few other extenuating circumstances that contributed to the lengthy sentence given to Raymundo Gallegos. He has been in prison for armed robbery before, and the judge said Gallegos didn’t show remorse for this crime. Furthermore, his charge comes with the added detail that he used “threat of force.” Two employees at the payday loan store says he threatened to shoot them in the head if they didn’t give him cash.

Details on the robbery

The robbery occurred June 16, and despite the months that have gone by, one employee is still on medical leave because she is too afraid to go to work. The manager of the cash advance loan store, called Check Mate Cash Advance Center, said he wasn’t scared, but he was angry.

After Gallegos pulled out a handgun at the payday loan store in LaCrosse county, the manager says, “”I had to stare down the barrel of that gun for two to three minutes. I have to live with the fact that, had that gun gone off, I might not be standing here today.”

A special case

Perhaps the judge was trying to make somewhat of  an example of Gallegos. The judge during the sentencing said “What you did cannot be excused in any way, shape or form.” Payday loan store robberies have become more and more common lately as criminals have figured out that the stores must keep large amounts of cash on hand in order to do business.

Unfortunately, most payday loan store robberies do not end with the robber getting 10 years in prison. Usually, the last thing heard about a payday loan store robbery is that “police are seeking a suspect.” Last week, several reports flooded in about payday loan store robberies, including incidents in Oklahoma, Kansas and Indiana. In most cases, the culprits have not been found. However, payday loan stores every day are increasing security measures, and police are starting to crack down in many areas.

Think this represents the average payday loan company CEO? Think again. Profitability is hardly out of sight, even if it has allowed the industry to grow. (Photo: flickr.com)

Infinite profits earned off the backs of the infinite suffering masses. If you take your news from the multi-colored, sugar-laden toothpaste tube that is the mainstream media, then you believe that the payday loan industry is reaping massive profits while those who crawl about on their bellies are drowning in six inches of debt. It’s such an affecting image that it resides in some nether-region beyond belief. In other words, don’t buy the hype.

Payday loan companies aren’t a charitable organization, to be sure. They profit from the service they offer to consumers, but as studies like “The Profitability of Payday Loans” by Paige Skiba of Vanderbilt University Law School and Jeremy Tobacman of Oxford University indicate, the profits derived from interest are very much in line with those taken by more “traditional” lending institutions.

Short-Term Liquidity Has its Price

That’s exactly what payday loans and similar forms of short term loans provide. Their convenient immediacy (sans an extensive battery of credit and background checks) presents a certain amount of risk for lenders, so price protection is understandable. Skiba and Tobacman use financial data from the Center for Research in Security Prices (CRSP) and SEC filings, as well as loan data from several major payday loan companies.

While the most expensive payday lenders charge what amounts to over 1,000 percent APR (somewhat moot; payday lenders typically charge 12 to 20 percent for two- to four-week loans), the authors find that “lenders’ firm-level returns differ little from typical financial returns.” The implication here is that on a per-loan and per-store basis, the payday loan industry experiences high costs that bite into their “profits.”

Methodology of the Study

The authors examine the CRSP and SEC numbers for seven First we summarize publicly available, firm-level profitability data from CRSP and SEC filings. They find average returns of 10 to 25 percent each year in profit. That’s on a per-firm level.

On the individual level, it is observed that loans are generally small, yielding a meager $49 in interest on average. Yet five percent loss ratios eat up more than one quarter of that interest. Net returns (interest minus defaults) amount “in expectation over all of the marginal borrower’s loans to only about $100,” find the authors. Payday lenders, then, would appear to exist in a highly competitive environment where per-loan and per-store costs are indeed large when compared with interest earnings.

Firm-Level Profits

According to the data, payday lenders have performed well on average, earning 10.1 percent profit. Yet because returns have been volatile, the Sharpe ratio (of excess return) is close to zero. Stock data has revealed little indication of excess dividends and SEC 10-K and 10-Q show only “moderate” return on equity, find the authors. Looking at the data of the payday loan firms involved in the study and comparing their returns against those of companies in the S&P 500, the authors once again find that there is “a profile of firm-level profits that fails to approach annualized payday loan interest rates.”

It should be noted that government regulation of the payday loan industry, particularly the September 2006 Talent-Nelson Amendment cap on lending to active-duty military, have impacted firm-level large risk premiums, to the point where the FDIC even released a report (http://www.fdic.gov/regulations/safety/payday/) suggesting that the “unusual risk” accepted by payday lenders justifies the interest and suggests ways payday loan companies can effectively handle this risk.

Individual-Level Profits

How does interest as high as 7,295 percent (the highest instance in the authors’ study) per year lead to only a 10 percent equity return? The authors look at individual-level data for payday loan origination, repayment and instances of customer defaults. The authors determine a mean payday loan size of $283 and median of $269. Eighteen percent interest leads to average revenue of $49 per payday loan, but once losses are taken into account, the story changes. The authors observed that approximately nine percent of post-dated collateral checks bounce. Collections were found to be pursued internally for 60 days, during which time the lenders collected on about half.

Credit standards tell an important tale as well. The better the short term loan applicant’s credit score, the greater revenues payday lenders derive. The authors find that “the intercept of the best-fitting line at the credit score threshold is $100.49. Thus, if the industry is competitive, the total economic costs of servicing the marginal borrower equal $100.49.”

Small Money, Big Default

Returns are astronomical in theory only. Stock returns are also observed to be modest for payday lenders. Store-level costs have to play a major role in this. A 2003 study by Jerry Robinson and John Wheeler estimated 40,000 employees in the payday lending industry. Their wages totaled $1.4 billion annually. They also found that total interest revenue for payday loans totaled $4.0 to $4.3 billion in 2002, indicating that employee salaries eat up a significant portion of that (about one-third).

A 2003 study by Michael Stegman and Robert Faris found that while the 2000 per-payday loan outlet profit in North Carolina was $57,999, the capital requirements for these outlets amount to at least $35,606. This doesn’t factor in wage costs, rent, marketing or administrative expenses, but it does include bounced-check fees, screening costs and loan losses.

You begin to see how expensive it is to operate a payday loan business. Flannery and Samolyk (2005) found that store costs and their revenues are related to store age, too. Start-up costs and establishing a clientele are difficult hurdles that have led newer entrants into the payday lending market to consider the online payday loan market.

A Cash Flow Example

Skiba and Tobacman present this hypothetical. Let’s say a payday loan store has $10,000 in capital at the beginning of the year. If risk is loan default risk is eliminated from the equation and 18 percent interest is earned every two weeks, the take would be $739,500 by year’s end. If annual wages amount to $30,000 (paid out every two weeks), that bill would be a large part of the $1,800 in interest income at the beginning of the year. At that time, the store would only early six percent on its capital. The year-end result would be an annual net of 2,150 percent, which is profitable but hardly extortionary.

So Someone Thinks Payday Lenders Should Only Charge by Cost?

Critics want a flat fee for payday loans – regardless of loan size – but the truth is that so many cost variables exist such as the cost of firms to originate payday loans that per-store differences in fees charged are necessary. Considering the explosive growth within the industry (200 stores observed in 1990 according to the authors vs. 30,000 in 2004), which came in no small part due to lobbying, there is both a consumer need for the product and an environment in which they can successfully exist on the subprime market.

Pricing behavior is largely regulated by oversight organizations like the Community Financial Services Association and the Online Lenders’ Association, but businesses that exist outside these member organizations may unfortunately set rates that are far beyond what is necessary. This is where government regulation can help rein in payday loan companies with the most excessive prices (even if this group may be in the minority of the industry), but excessive regulation is not desirable. Stifling market competition and limiting consumer choice are hardly a desirable alternative.

Once again, Personal Money Store proves that online payday loan customers have solid, steady incomes. Where's the exploitation? (Photo: picasaweb.google.com)

If you don’t already know that American news media is first and foremost an entertainment medium, allow me to be the one to break it to you. Sensationalism sells better than the truth. Biased story selection and reporting slant are inescapable, particularly when you consider the influence of corporate sponsorships. Since Wall Street and the American banking industry are monolithic entities, their money makes a big difference in what the public hears about the economy and the shenanigans that really led to the country’s economic collapse.

They Don’t Want You to Know that Payday Loans are Useful

So they create smear campaigns that accuse the payday lending industry of preying upon vulnerable segments of society, such as the poor and the elderly. However, many studies of the industry have proven this claim to be false. Looking at applicant demographics for Personal Money Store from June 1, 2009 to October 20, 2009, we see a different picture. Our online payday loan customers are not disadvantaged, too young or too old. They’re at a stage in life where they have financial experience and know how to spot a good deal when options are few.

The Numbers Tell the Story

Consider all customers who applied for an online payday loan on Personal Money Store (accepted or denied), here are some facts to ponder:

• Average age: 35. These are people who have some experience dealing with the financial shocks life can throw your way. As industry studies tend to show that many payday loan customers have young families, it may be safe to say that Personal Money Store’s average applicant is in a position where they need to be careful with the way they handle their finances.
• Average income: $31,690. That’s hardly poverty level, and that’s just for the individual applying. If you’re talking about 35-year-olds who are just beginning to come into their own career-wise, then you have someone who hasn’t reached their maximum earning potential yet. Perhaps their access to certain forms of credit has been limited due to a relative scarcity of liquid assets. This makes payday loans a more easily attainable option in an emergency.
• Average length of employment: 6 years. That’s an indication that the person is dependable, rather than transitory and risky. They’ve been trusted to do their job, which payday lenders definitely take into account.
• Average time at current address: 3 years. Again, this could be seen as a stability indicator. Constant relocation tends to walk hand-in-hand with fluctuating types of employment held and income levels. If a payday loan applicant is entrenched, perhaps they are less of a risk.
• Home ownership: 34 percent. While hardly a majority, this statistic is still significant. More than a third of Personal Money Store’s payday loan customers own their own home. That goes along with steady income and personal responsibility, as they have to make a monthly mortgage payment.
• Average time spent on application form: 4 minutes, 44 seconds. This tells us at least two things. First and foremost, it’s proof that it doesn’t take all that long to apply for an online payday loan. The application asks for standard information to establish a person’s employment, checking account existence, age and identity. It’s easy to complete. What this number might also tell us is that our customers aren’t rushing into the process too quickly; they’re being careful and carefully considering what the application requests.
• Percent of customers who apply for installment plans: 27.76 percent. This addresses another area where media and banking industry critics have it wrong. They claim that payday loans are a certain path toward an endless cycle of debt. Used improperly, they can cause harm. But so can Cheese Whiz. If a responsible customer (most people are responsible in this world, I find) needs to extend their repayment schedule due to unforeseen financial occurrence, installment plans are usually available.
• Percent of returning visitors out of all traffic: 4.64 percent. We hope you enjoy our site; let’s grow this number!
• Percent of applicants who are return visitors: 7.36 percent. We hope you enjoy our site; let’s grow this number! However, keep in mind that this stat also indicates that people who apply for payday loans at Personal Money Store aren’t being “roped in,” as if against their will, to that media-blustered endless cycle of debt.

The Numbers for Approved Applicants

Not everyone who applies for online payday loans at Personal Money Store receive a green light. It’s important that there are standards in place. These protect both lenders and the consumer.

• Average age: 37. Mature enough to know what financial decisions work best for them. Responsible enough to make good decisions for their families. That’s your average Personal Money Store payday loan customer in a nutshell.
• Average income: $36,000 for the applicant only. Above average in many instances, and certainly not too poor to be able to repay their payday loan debt.
• Average length of employment: 6 years. Stable.
• Average length at current address: 3 years. They’ve put down roots. Doing the right thing is important for them.
• Home ownership: 42 percent. That’s almost a 10 percent increase over the average for all applicants. It indicates responsibility and greater financial security. It goes to show that everyone can use a payday loan in a pinch.

Even Declined Applicants Show Experience, Solid Income

• Average age: 34.
• Average applicant income: $30,672.
• Average length of employment: 5 years.
• Average time at current address: 3 years.
• Home ownership: 31 percent.

Some Techie Stats For Our Online Payday Loan Applicants

You’ve heard the whole thing about the “browser wars,” right? While using Internet Explorer could be viewed as a negative in this day and age, the truth is that it has a large market share thanks to the preponderance of Windows software. Here’s a breakdown of what browsers Personal Money Store applicants use.

• Internet Explorer (all versions): 62.37 percent. It’s all about market share.
• Internet Explorer 7: 47.3 percent. Not everyone has upgraded to IE 8 yet.
• Internet Explorer 8: 32.09 percent. Here we go. But why not Firefox or Chrome?
• Internet Explorer 6: 20.57 percent. Nobody’s perfect.
• Firefox: 24.57 percent. This number seems likely to grow over time, although it may never catch IE, which has a big head start.
• Safari: 8.45 percent. Mac users take out payday loans, too.
• Chrome: 2.8 percent. This browser is relatively young, but it’s quite fast. Why not make your online payday loan application process that much faster?

Connection Speed

Personal Money Store customers have proven that they are living in the 21^st century, as at least three-quarters of applicants have access to broadband connections:

• Cable: 41.97 percent
• DSL: 23.83 percent
• T1: 9.99 percent
• Unknown: 20.82 percent. Yes, even international men and women of mystery need online payday loans.
• Dialup: 2.15 percent. I know it’s cheaper, but really? Payday loans can help with that.

So What Have We Learned Today?

Online payday loan customers at Personal Money Store do not fit the negative stereotypes the media would have you swallow hook, line and sinker. They are responsible and consider their options carefully, often because they have an entire family’s financial welfare to consider. They certainly aren’t being exploited. That’s the media’s job.

(Photo via Wikimedia.org)

People go to Wal-Mart for one thing; to save money. I don’t care what others have to say about the world’s largest retailer, Wal-Mart is one of the best places to go to reduce the probable need of a payday loan. I find just about everything I need there: kids toys, home appliance, electronics, food, beauty products, etc. They have also expanded to other ventures. For instance, you can now get great deals on Wal-Mart caskets. Yep… I said caskets.

Wal-Mart Caskets Available Online

Wal-Mart is taking it all the way, from the cradle to the grave. Wal-Mart is offering caskets online with prices that range from $999.00 to $3,199.00. These unbelievable prices will no doubt carve a hole in the pockets of funeral homes, which has been the major source for caskets.

With Wal-Mart, you can get a casket for $1,000 instead of paying the traditional amount of $2-$3,000 at funeral homes. Caskets are shipped within 24 hours and delivered by FedEx overnight. According to the website, there are no refunds unless the product has been damaged during shipping. Wal-Mart is also allowing people to pay for the caskets over a period of 12 months with no interest. Sounds like a pretty sweet deal to me.

Cheaper Caskets – Wal-Mart or Costco?

This Wal-Mart casket motion follows a similar shift made by discount competitor Costco, which also sells caskets online. I compared the prices of Wal-Mart caskets with the price of caskets at Costco and so far, from what I’m looking at, you can find cheaper caskets at Costco. You can get a casket at Costco for only $924.99, rather than paying $999 for a casket at Wal-Mart. This way you save$74.01 on a casket. That’s another sweet saving!

Death of a Loved One is Hard Enough

The death of a loved one is hard on anyone. It also carries a huge burden of large expenses that may require an instant payday loan. That’s why I’m glad places like Wal-Mart and Costco are offering great deals on interment appliances such as caskets and floral arrangements. Death of a loved one is hard enough. Things are a lot easier when you have a little extra cash on hand.

Consumerism is American. Free market capitalism and payday loans are all part of necessary competition, despite what critics would have you believe. (Photo: flickr.com)

If media and banking industry critics of payday lending are to be believed, payday loan outlets are perched in the reeds, muscles coiled in anticipation of springing upon unsuspecting consumers. “Predatory lending” is the fallback term such misinformed critics use, under the assumption that people who use payday loans are tricked or somehow lured into doing so. Yet ample evidence exists that indicates that payday loan customers are educated and take time to consider their options before choosing the short term loan product.

Understand Who Uses Payday Loans

Edward Lawrence and Gregory Elliehausen studied who uses payday loans and why in their April 2008 Contemporary Economic Policy article “A Comparative Analysis of Payday Loan Customers.” Using a national survey that takes into account numerous payday loan outlets belonging to industry trade association the Community Financial Services Association (CFSA), the authors reach beyond the veil of anecdotal evidence as they interview 427 payday loan customers from the survey. Rather than finding an uneducated, unsophisticated group that is being victimized against their will or better judgment, Lawrence and Elliehausen found that payday loan customers consider their decisions carefully and weigh the cost of payday loans against other costs both monetary and environmental.

Consumers, Consumption and Debt Burden

Consumer credit fills a definite need, particularly for segments of society without a great deal of liquid assets at their easy disposal and a significant debt burden. Building upon Juster and Shay’s 1964 study “Consumer Sensitivity to Finance Rates: An Empirical and Analytical Investigation,” where consumer credit is seen to be used on household durable goods, and multiple studies that suggest that such a method is financially feasible when the rate of return is high, Lawrence and Elliehausen point toward a model where high interest payday lending may be optimal for certain consumers. The conditions under which the authors see this would be the case are “relatively high-return investment opportunities, low current income and strong preferences for current consumption.”

Yes, We Live in a Consumer Culture

Americans see it as their right (and their curse) to “keep up with the Joneses.” When this behavior is left unchecked, personal debt can spiral out of control. Thus, when consumers look to short term loans like payday loans to handle financial shocks, they do so in large part because they do not have the liquid assets available to handle their debt obligations in lump sums. Creditors know this, so they tend to limit the amount of credit they extend so as to protect themselves from default. Unsecured personal loans are available from payday lenders to make up the difference. They are available at a cost that the authors find consumers are more willing to swallow than more expensive or socially taboo alternatives.

The Rise of Rationed Borrowers

The authors refer to the Juster and Shay study in stating that borrowers constrained by their debt loads are “rationed” borrowers. Juster and Shay theorize that rationed borrowers are “in early family life-cycle stages where rates of return on household investments would be high.” Their income would be low to moderate, which would explain the small amount of liquid assets available. Furthermore, their demand for consumer credit would be connected less to interest rates and more to the general lack of standard credit available.

That’s the way Juster and Shay saw it in 1964, 45 years ago. Things have changed a great deal since then. Creditors have a greater technical facility for assessing and pricing risk, say Lawrence and Elliehausen. The requirements for equity have lessened and the time for short term loans to reach maturity have lengthened. Unsecured credit through bank-issued credit cards has also become more readily available. There is a “subprime credit card market” for today’s rationed borrowers, but there are other alternatives that do not deal so heavily in the constant spiral of revolving debt. Payday loans have been a prime alternative for rationed borrowers.

NOT Preying Upon the Elderly

Some critics of payday loans claim the industry preys upon the elderly. However, numerous recent studies indicate that young and middle-aged consumers have contributed to an increasing demand for short term loans. Their drives are somewhat different, as Lawrence and Elliehausen’s findings show. For the young, their demand for payday loans has been predicated on how quickly they can pay off their short term loans (seven to 20 days is standard) and hence regiment their budget, whereas middle-aged  consumers’ demand is more in tune with obtaining better interest rates.

Budgetary Discipline

This sense of maintaining a budget in the face of environmental pressures resonates through various other studies. Katona’s “Psychological Economics” (1975) indicates that consumers “may be reluctant to increase credit card debt because they fear that they will not have the discipline to make payments on the additional debt.”In this case, Lawrence and Elliehausen hypothesize that consumer use of payday loans via a standard contract may be expensive in a traditional sense, but if the alternative is increased vulnerability to higher debt or even an inability to access credit, the short term loans are preferable in the long run.

Survey Says

Payday loan customers surveyed by Lawrence and Elliehausen tend to break many of the stereotypical notions spread by critics of the industry. They are not in fact poor; just over half had family incomes between $25,000 and $49,999. Considering that having an active checking account is a requirement for obtaining a payday loan, unbanked households (generally lower income) are not being exploited by such short term loans. In terms of age, two-thirds were under 45 years old, with more than one-third under 35. Only 10 percent were 55 or older, so clearly the elderly is not being targeted. Family situations indicated more than half were married or living with a partner, and 65 percent of respondents had children under 18 years of age living in the household. These are young families with debt loads who are attempting to deal with financial shocks as best they can. Now that America is in a recession, I’m sure that if Lawrence and Elliehausen conducted their survey today, the numbers would continue to support this idea.

Do They Have Other Options?

The survey indicated that a whopping 91.6 percent of payday loan customers do rely on other types of consumer credit at times. However, considering the finding that payday loan customers are less likely to use revolving credit like credit cards, one would think that they find an advantage in using the more regimented payday loan model. I would offer that it is precisely that budgetary discipline discussed earlier that makes payday loans more appealing for these rationed borrowers.

Of course, having other credit options tends to go hand-in-hand with the potential for a greater debt burden. As such, the authors’ survey found that 73 percent of payday loan customers had been turned down or limited in their ability to secure other types of loans over the past five years. Payday loans become a necessity during financial emergencies if other options are limited. In fact, two-thirds of respondents claimed they used payday loans due to unforeseen financial events.

Making Informed Decisions

Lawrence and Elliehausen found that respondents to the payday loan survey tended to follow cognitive models suggested in other consumer credit studies. Specifically, they go through a process where they recognize need, gather details, consider options, decide and then evaluate how it went in the aftermath. As the majority of consumers in the survey appeared educated (the majority were high school graduates or had college experience), it would stand to reason that payday loan customers tend to display cognitive ability and efficiency. In the case of details like APRs and finance charges, greater education tended to equate to greater awareness (where such factors were considered important in the decision-making process).

Young Families Who Consider Options Carefully

Lawrence and Elliehausen’s findings speak to the financial realities facing many American families. They’re just starting out, their wages are not yet high and they don’t have many liquid assets lying around for a rainy day. Used in a non-habitual fashion, payday loans help absorb financial shocks during times of financial difficulty. They give consumers “a little control over their financial affairs they otherwise would not have,” write the authors. Is it any wonder then that customer attitudes toward payday lending were positive in the survey? There is peace of mind in being able to handle one’s own affairs. Since the majority of those surveyed did not show signs that they were using payday loans beyond the fashion for which they were intended, why is it that the government should be so gung-ho to step in with heavy regulation and taxation? By stymieing competition in a free market economy and restricting payday loan availability, aren’t they harming both consumers in need and their own capitalist system?