The cash advance loan industry is giddy over a recent customer survey that shows that a lot of of their customers could gladly take out the expensive loans again. As a matter of fact, most customers polled in the survey said they were pleased with their loan. This might shock individuals who regard these loans, with interest rates that can exceed four hundred percent a year, as predatory lending. On the other hand, the payday loan business conducted the survey on their own, so perhaps the results are not so astonishing after all.
The payday loan lending industry is in the business of providing temporary loans to people who need a few hundred dollars to pay their bills until they receive their next paycheck. The borrower will get the loan for fourteen days and provides the loan company a postdated check for the amount of the loan plus interest. In fourteen days, the borrower will pay back the loan in cash, or instead, the loan company will deposit the borrower's check. Although the common loan varies from $100-$1500, the interest rates tack on anywhere from $10 to $20 for each $100 borrowed. When thought of as an annual rate of interest, the interest paid on a two week loan can add up to 400% or more each year.
Individuals who are opposed to quick cash loan shops, and there are many of them, claim that the lenders take advantage of poor people who have few options for loans and represent the segment of society that is least capable of paying these kinds of fees for loans.
The quick cash loan industry disagrees. The Community Financial Services Association of America, a cash advance loan industry trade organization, offers differing information on its Internet site:
The group says that their common client is not indigent, but literally earns $25,000-$50,000 annually, that more than 40% own their own houses and that a majority of their clients possess some college schooling. They continue to state that this shows that their common customer isn't a part of the working poor but is really a part of the middle class.
On the other hand, a $25,000 income is not exactly rich, and more Americans own their homes than at any time ever. Among individuals with a college degree, $25,000 may be regarded as lower than an entry level wage. In reality, the average cash advance loan customer is less well-heeled economically than most people, who have other possibilities readily available to them for obtaining cash, such as charge card advances and bank loans, both of which have substantially reduced rates of interest than payday loans.
The industry does note correctly that for small, short term loans that are paid back in a timely manner, the fees charged by quick cash loan shops are lower than the penalties that banks demand for bounced checks or overdrafted accounts. Then again, the service fees charged by banks for bounced checks aren't fees or interest but are, in fact, penalties intended to discourage the behavior.
No doubt, a lot of individuals who borrow from cash advance loan shops are pleased with their encounters. One shouldn't come to the conclusion that they are happy just because they retain coming back, however. If your only solution for borrowing money is a shop that provides it at four hundred percent a year, you will come back each time you require cash.
There are instances when cash advance loans appear sensible, but they ought to be used solely for the infrequent emergency circumstance and not for regular cash shortages. If you find yourself in a financial bind once, a payday loan may help you. Be certain to look around to make sure you find the best possible rate before applying.