Payday Loans – a Bridge to Your Needs

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Payday loans are in existence since 20 years now in the United States. Intended to meet the requirement for disaster cash, the short-term loans are fundamentally advances on salaries and meant to be repaid on the next payday usually within 30 days. Borrowers secure these types of loans by providing a post-dated check or electronic access to their bank account.

payday loans

What does statistics say about payday loans?

The US regulators are eyeing on the other side of facts of payday loans though. CNBC news reported in May 2013 that Payday loans cost the U.S. economy nearly $1 billion and thousands of jobs in 2011, according to a special report from the Insight Centre for Community Economic Development. The said study says that the encumbrance of repaying the loans caused in $774 million in lost consumer outlay and 14,000 job injuries. Bankruptcies related to payday loans numbered 56,230 taking an additional $169 million out of the economy. The statistics are provoking and can hit anyone’s mind.

What is the bitter truth behind these debt anomalies?

Payday loans are small personal loans with bad credit. They are not meant for larger funds availability. Usually people take out payday loans without any cap on it and often fall behind due dates. They need to understand that the payday loans shall be borrowed to the extent or lesser than the monthly income secured by them. The lenders are going to happy taking extra risks but the borrowers shall understand the possible consequences of 300%-800% interest charged by them.

Not just the first receipts but the extensions provided on payday loans are equally dangerous for those whose repayment capacity is not enough. They tend to receive payday loans more than 8 times. People with bad credit often fall in the traps of extensions and realise they have added debts instead of reducing them through payday loans.

The other reason behind increasing debts through payday loans is that the job prospects have not improved in the US. The Federal Regulators may not agree with this fact but the unemployment has risen by more than 7.5% than actually it is officially declared which include no jobs or no increase in the pays. If pays are not going to increase then payday loans will remain a temporary solution for debts only.

Banks are not behind in committing this menace though indirectly, many reputed banks like Bank of America, Wells Fargo, JPMorgan Chase etc. have allowed payday lenders to withdraw funds owed by borrowers who are bank customers, including in states such as New York, where payday loans are disqualified. No one bother to report such malpractices.

On the other side, many states have fixed APRs beyond which lenders cannot charge interest rates. Despite such caps, the lenders collect the higher interest rates and borrowers know they are in such financial trouble that if they report then may not have second chance to rebuild their financial cycle, who often mistaken.

US federal regulators have already proposed regulations on the payday loan practicing in April 2013 however they need to pass a law that curb the unfair trade practice instead of stopping this finance route itself.

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