Does Easy Access to Quick Cash Help or Harm Borrowers?
Many economists are now questioning whether easy access to quick cash is helping or harming borrowers. Access to credit has long been accepted as an important part of building a strong financial base. However, what many people do not realize is that the types of consumer credit in use today were rarely seen before the economic boom that followed World War II, according to a report compiled by the Federal Reserve System.
In fact, most types of modern consumer credit, including loans to purchase automobiles, remodel homes and purchase durable goods, were virtually unknown prior to the 1920s. Once World War II ended, however, millions of young American couples found that credit allowed them to achieve their goals faster. By the 1960s, many households were making car payments, furniture payments and credit card payments as well as mortgage payments, a trend that has continued to grow. However,
Does the Ease of Obtaining Quick Cash Loans Help or Hurt Borrowers?
The issue of loans for people with poor credit is still being debated among consumer advocates and economists, according to The Wall Street Journal. On one side are those who claim that many people with bad credit have already shown their inability to manage their debts responsibly; they also assert that credit is no substitute for insufficient income. Opposing views claim that access to credit is necessary if people with limited incomes or damaged credit are to improve their financial situations, obtain an education, launch a business or receive adequate medical care.
Which side is correct in the debate over whether access to fast, easy cash advance loans helps or hurts the borrowers? Both sides have raised valid points, but neither side seems willing to admit that in the final analysis, it all depends on the borrower. Some borrowers seeking quick cash with bad credit may be financially irresponsible, but some have given careful consideration to the consequences of taking out a loan. There are low-income individuals who have boosted their earnings significantly without borrowing money, but there are others who found it impossible to save up enough to start a business or continue their education. No two borrowers are in identical situations or possess identical financial awareness. Therefore, it is impossible for economists or consumer advocacy groups to make blanket statements about whether fast loans are a benefit or a detriment to borrowers.
When Quick Cash Loans Benefit Borrowers
Responsible borrowers only use credit when it is truly needed. Furthermore, they always have a workable plan to repay the loan. If they are practicing responsible borrowing, having access to quick cash can prove beneficial. For example, if people need to have a car repaired to have transportation to work, a fast loan can help prevent lost earnings or even the termination of their employment. Another example would be a borrower who needs medical care to take care of an illness that might turn into a more serious condition if left untreated, resulting in additional expenses for care and perhaps lost wages. In addition, being able to get quick loans when they are needed can reduce stress and ease any tensions that might exist between spouses or family members, preventing unnecessary damage to relationships.
Having access to quick cash may also have long-term benefits when natural disasters strike. According to a study posted on FDIC.gov, people in communities having access to payday loans fared better following earthquakes, floods and other natural disasters than similar people without access to payday loans in communities suffering a similar disaster. The study examined birth rates, deaths, substance abuse treatments and foreclosures; in all four categories, having access to payday loans appeared to provide more favorable outcomes. Although the study focused on disasters affecting communities, the researchers inferred that the results would be similar for a disaster that affected only one individual or family. The researchers also felt that the benefits would be greatest for those with limited options to obtain credit, so sources for quick cash with bad credit could potentially be providing a literal lifeline to some individuals.
When Access to Quick Cash Can Prove Detrimental
Many borrowers find themselves in dire financial condition when they incur more debt than they have the income to repay. Some people buy cars without considering that there will be more costs involved than simply the monthly payments, including insurance, repairs and fuel. Some commit to mortgage payments that can become unmanageable if other expenses increase or income decreases. Still other people make frivolous purchases and only stop when their credit cards reach their limits. What all of the people in these examples have in common is that they did not plan how they would manage to pay their debts before they incurred them. For those with this type of personality, access to easy, quick cash could be detrimental, plunging them deeper into debt.
Are Quick Cash Loans Good or Bad?
In the final analysis, payday loans and other sources of quick cash with bad credit are neither good nor bad in themselves. Instead, they have the potential to do great good if used correctly — and the potential to cause great harm if used irresponsibly. However, the same can be said about any credit product. Overdraft protection can be an excellent product if it is only needed once every year or so, but the fees can be devastating if it is needed several times a week. Credit cards can be handy to meet unexpected expenses or to make a necessary purchase immediately, but making the monthly payments on several cards that are at their credit limits can make it impossible to build a savings account or even meet living expenses comfortably.
Like all credit products, consumers must use quick cash loans wisely if they want to gain the benefits without suffering the detriments. In other words, it is about personal responsibility, common sense and self-control. Without these, any form of credit can turn into a cycle of debt that can play havoc with any attempts to maintain a budget, improve one’s economic situation or find freedom from financial worries.
Learn More About Quick Cash Loans
The more that you know about your credit options, the better equipped you will be to make the right choices. You can find an extensive selection of educational articles on personal finance at the Personal Money Store.