The Controversy Surrounding Payday Lenders and Their Short Term Loans
Over the years, many people have found they have no alternative but to apply for and repay loans acquired from payday lenders. These payday lenders have traditionally been independent of the major banks and operate small business establishments. You may have heard of loan sharks and pawnshops, and the general consensus has often been that these establishments are used by people on a low income who are desperate for some quick cash, and that many innocent people are taken advantage of with this system that involves short term cash loans with extremely high interest rates.
Although this may be true in certain situations, it is certainly not always the case, especially as many of the traditional lending institutions are now also becoming payday lenders, offering short term loan solutions to those in need. This could be due to the fact that many of the traditional banks are realizing payday lenders and their quick loan products are becoming increasingly popular, so much so, that it is becoming a billion dollar industry. This popularity has been further enhanced with many payday lenders offering their loan products in a quick and convenient manner through online resources.
With the belief that payday lenders target the low income earners, placing them in a debt cycle and further financial hardship, a great deal of debate has been entered into in relation to this matter. The government has therefore imposed regulations on the lending limits and API rates that are charged, so that there is consistency and a general standard of ethics amongst payday lenders. One of these regulations is that all fees and charges, including the interest payable, are disclosed clearly before a person signs on the dotted line for a payday loan.
Reputable payday lenders have made it easier for the average person struggling to pay emergency debts, and when they are used in this manner, payday loans become a very viable option. How much will your bank charge you if your account is overdrawn? How much will you need to pay in fees on your account if a check bounces? If you borrowed $200 from a payday lender for a period of 2 weeks, it could cost you anywhere up to $30 in additional interest and fees, when you pay the loan back at the end of the 2 week period. For many people, this $30 payment on top of the original loan is more than worth it, when they consider what their bank will charge them anyway.
There will always be positives, negatives and controversy in relation to quick cash loans acquired before your next payday. The key is to be well informed, only obtain the amount of cash you can afford to pay back on your next payday, and look for reputable payday lenders that clearly explain their fees, terms and conditions.