Payday Loans and Lending Industry
Wednesday, July 22, 2009@ 9:29 AM
Payday Loan Arguments
Debatable arguments about payday loans
Critical aspects of the payday loan industry
- Report by the Center for Responsible Lending (CRL) claims that demand for payday loans is exaggerated.
- Repeat borrowers equal more than 80% of the total volume of loans.
- Fees related with the recurring loans total 3.5 billion per year.
- Borrowers who are taking out a payday loan to pay back a payday loan.
- Targets small income borrowers.
- Mires borrowers in cycles of debt.
- Digs you into thicker debt.
- The industry generates demand by trapping borrowers in insurmountable debt.
- Families using payday loans are likely to have less income, lower wealth, fewer assets and more debt.
- Tendency to be employed by minorities, single women, young and less educated people, and non-homeowners.
- High APR (Annual Percentage Rate) interest.
‘Positive’ characteristics about the payday advances
- Strong option to the other services.
- Key to short-term financial troubles.
- Bridge to get a borrower over an economic crisis.
- Reaches people systemically disregarded by the banking segment.
- Discharge the rising need for instant loans in low-income communities.
- Handy, lower-cost substitute to bouncing a check.
- Better than paying off service fees for a returned check.
- More effective than cumulating charges due to overdue bill payments.
- Easily approved for the loan.
Other facet of paycheck advances
- Sometimes one payday loan is not sufficient.
Other payday loan industry related information
- Justifies a close inspection by policymakers.
- Implement firm policies.
- Payday loan legislation should be balanced with more savings opportunities.
- Lower cost alternative loans to payday loans.
- Getting more informed about the specifics of payday loan borrowers and lenders.
- Californian bill would increase the payday loan maximum value from $300 to $500.
- CRL advocates restricting borrowers to no more than six loans per year.
- CRL advises retaining the present $300 loan limit.
- Bill proposal to restrict the APR for payday loans at 391%.
- Bill proposal to eradicate the industry.
Payday Loan Repeat Borrowers
Sources of the arguments:
