Seeking The Truth About Payday and Cash Advance Loans
Posted on November 24, 2008
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I’ve written numerous times here at Philaahzophy about payday loans and been taken to task for by more than one reader. Of course, every one of these readers has been an upper-middle class person whose more worried about the daily drop in the Dow Jones (group A) than whether or not they can pay their utility bill that month (group B). You see, payday loans weren’t created for group A people. They were created for the vast number of Americans who live paycheck to paycheck with no savings (group B people).
When a member of group A decides that they want to remodel their house, buy a new car, or send their kid off to college they rarely hesitate to go to a bank and ask for a loan. Yet when they hear that a member from group B is seeking a payday loan to cover their rent, fix their car, or feed their children everyone gets up in arms. Of course the people in group B have to pay more for a loan than the people in group A – they’re a bigger risk! How many of the people in group A would be willing to loan cash to a stranger in group B? None that I’ve ever me. (If you count yourself amongst them, I could sure use a $30,000 loan!)
Lets take a look at a few of the arguments and “facts” thrown around by the self-righteous payday loan haters-
- Payday loan lenders are taking advantage of poor people.
- In other words, the members of group B are all idiots who can’t do basic math or they’d be members of group A as well.
- Payday loan interest rates are far too high.
- Payday loan rates are, ultimately, set by the market. The lenders want them as high as possible while the borrowers want them as low as possible. But rates increase with risk and, once again, how many group A folx are willing to make unsecrured loans to group B members.
- A “payday borrower pays back $793 for a $325 loan” (Center for Responsible Lending Report: Financial Quicksand: Payday lending sinks borrowers in debt with $4.2 billion in predatory fees every year (page 6, Finding #1))
- “The average Florida borrower during the one-year reporting period took out approximately eight (8) loans (i.e. 7.8 loans). Total annual fees for the average Florida borrower were approximately $329.28 to gain access to an average loan of $382.43 at eight (8) different times during the year.” – the actual Veritec Solutions report on which the CRL report was based. Do you not see the difference here?
- Borrowers become “trapped” and simply rollover the same loan over and over again never being able to pay off the loan.
- “The CRL Report does not clearly state other relevant facts about consumer usage; for example, over 43% of borrowers took out 5 or fewer payday loans in Oklahoma during the one-year reporting period. Similarly, over 74% of Oklahoma borrowers took out 12 or fewer payday loans in the one-year reporting period as noted in the figure below. Similar statistics are reflected in the Florida report.” – Veritec Solutions
- People would be better off if all of the payday loans were put out of business.
- “We test that claim by researching how households in Georgia and North Carolina have fared since those states banned payday loans in May 2004 and December 2005. Compared with households in states where payday lending is permitted, households in Georgia have bounced more checks, complained more to the Federal Trade Commission about lenders and debt collectors, and filed for Chapter 7 bankruptcy protection at a higher rate. North Carolina households have fared about the same.” – Federal Reserve Bank of New York
In other words…
PAYDAY LOANS BENEFIT PEOPLE!!!! It’s not just me saying this, it’s the Federal Reserve (you know, the people who you trust to control the entire United States Economy) and Veritec Solutions, which is the company hired by the states to regulate the Payday Loan industry. Have a different objection? Post a comment and we’ll all see if it holds up.
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Most people are well aware that money does not grow on trees, this means that generally you are going to have to spend a significant amount of time working on your budget in order to create a spending plan that you can actually live with successfully. I wonder how people get desperate and do stupid things for money when your budget fails and disaster strikes. Some have a sense of dignity and responsibility can check out good options, like a payday loan, but apparently that isn’t enough for some people. December 4th, a Thursday, was the scene of one the largest jewelry robberies in history. Four armed thieves stormed the Paris Harry Winston Jewelry store, and quickly made off with an unprecedented amount of merchandise. The thieves made off with €85 million, or $108 million, in jewelry and watches in a matter of minutes. Three of the four wore women’s clothing as disguises, and apparently had done their research, because they knew the names of store employees. The store is one of the premier locations for perhaps the highest end of high end jewelers, and was the scene of a robbery almost one year previous to the one that just occurred, although significantly less merchandise was stolen at that time. Authorities believe it won’t be possible to move the merchandise through normal outlets, and will likely be sold on the black market as the attention the robbery has gotten is too great. The rest of us won’t be contemplating something as odious as robbery to cover a sudden gap in our finances – we can look into other things, such as payday loans. Click to read more on payday loans.
Welcome Joseph!
I couldn’t have put it better myself. Would you rather have the guy down the street get a payday loan at an interest rate you consider exhorbitant or break into your house and pawn your flat screen tv in order to pay his bills
Good post, agree with you today, a cash loan till payday therefore helps the borrower when he is in need of urgent cash. Urgent expenses such as medical bills, phone bills or any other unexpected expenditure can be easily dealt with by a payday loan.
Most people who use pay day loans have no other place to get money fast. They are a high risk and if you look at interest rates look at credit card companies who chanrge 25 % and up and want people to pay minimum so they makle money for years.
freestuffs last blog post..Freeloans. Paydayloans. Cashadvances.