Payday lending or making payday loans is now a booming business, and it's only going to keep growing as life gets harder for more and more people every day.
At the same time, it's a business that isn't always regulated. In fact, 17 states in the US have banned payday lending because it seems to be so lawless.
It's not hard to figure out why there is such a big problem. Even though payday loans are meant to be short-term solutions to help you get by until your next paycheck, many people end up keeping them longer than they should. And since the average interest rate in this industry is about 470 percent APR, one has to wonder why it is growing so quickly.
The answer is that it provides a service that people need at a price they can afford. The actual APR doesn't matter much to the customer because all they care about is, "Can I pay back the loan when I get paid again?"
Why do people get cash advances? Most likely, the answer has two parts:
First, because it's a quick and easy way to get cash quickly, and it's even easier now that it can be done online. Second, because they probably can't get credit any other way.
Payday loans can be a lifeline for people with bad credit when they need it most, like when they need to pay unexpected bills or keep an item they bought on credit from being taken away.
Clients only cause trouble when they can't pay back loans, but isn't that true of all kinds of credit? Still, it can't be denied that with such astronomically high APR rates, it only takes a couple of missed payments for the small amount borrowed at first to turn into a huge amount of debt.
Look at the case of Ms. A. She took out a $500 loan with $125 in interest due two weeks after the loan was paid back. After missing a few payments, the debt went from $500 to $3250, even though the original debt was only $500. How frightening is that?
Payday loans do play a role in the day-to-day life of modern America, and many industry insiders from the more reputable lenders are pushing hard for stricter rules, rules that could then be put in place all over the country instead of just in one state at a time.
So, consumers will know exactly where they stand in terms of payday lending laws, and it will be in the best interest of the more trustworthy lenders to grow across the country. This makes sure that everyone can use their services and keeps them from falling into the hands of less honest money lenders.
"Payday lending is the poster child for predatory small loans that take advantage of consumers who are having trouble making ends meet," says Jeann Ann Fox of the Consumer Federation of America.
If payday lending rules and laws were the same all over the country, this kind of grim prediction would be less likely to come true. Click http://webbiz99.com/paydayloans/ to find out more.
