Thursday, December 27, 2012

Why Many Payday Loan Customers Use the Service to Cover Small-Dollar Expenses

Finance
Finance (Photo credit: Tax Credits)
Over the years, the usefulness of payday loans has continued to increase. For many of the population payday loans are used as a quick source of cash in an emergency. The unforeseen costs of seeing a doctor or having a needed car repair done can force many to overdraft their bank accounts or exceed the credit limit of a credit card. Many still write that check or charge on their credit card. Your bank gladly makes your check good and charges you a fee of $40 or more. The credit card company also rewards you with an over credit limit fee and raises your monthly APR.

Even with all the negative press payday loans get, they are actually cheaper than going into overdraft, for short term cash needs. The average fee for $100 of credit is $17.60 at a payday loan compared to bank overdraft fees of $30-$35 in 2012(FDIC).

Overdraft fees are more of a problem with people who carry a low balance in their account. Not going into overdraft and saving the penalty fees associated with it can add up to a real savings over time.



"When used on a recurring basis for small amounts, the annualized percentage rate for fee-based bounce [overdraft] protection far exceeds the APRs associated with payday loans."

Sheila Bair
Former Chairman
Federal Deposit Insurance Corporation

Like all financial obligations, payday loans need to be taken seriously by the borrower and the lender. How do you know if your lender is a legitimate concern and obeying the laws for payday loan lenders in their state.

Go to the website of the lender you want to use. Look for an "About Us" link. An upstanding company has extensive information about themselves. Look for information about their license to operate in the state. Do they provide complete contact information. Look for links and phone numbers of state regulatory departments with contact information. Use the information and call the states regulatory division and ask questions. 

Also look for the emblem of the Community Financial Services Association of America. This association sets guidelines and best practices that ensure responsible conduct among lenders, protect borrowers’ rights, and encourage self-governance of the payday advance industry. Their website has a hotline where you can voice concerns and problems you are having with the lender.


Payday loans should be used for short-term financial needs only, not as a long-term solution. Customers with credit difficulties should seek credit counseling. For more information go to USA Cash Services Website


2 comments:

  1. Well, I think that payday loans are so popular because it’s one of the easiest ways to borrow cash. We live in tough economic times, prices are high enough but most of people have limited budget and find it difficult to cover all the expenses, that’s why they apply for loans till payday. With a help of this service it’s possible to borrow relatively small amount of money and pay back in a short term, but I would recommend to use these loans only if there’s an emergency. Do not use any lending service just because it would be good to get some additional cash. Cash advance loans have high interest rates because they are unsecured, so there’s more risk for the lender. So use it only if you have no other option and need money urgently.

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  2. I am a private lender, I grant loans to companies and individuals at a low and affordable interest rate of 2.5% in repealing both the short and long term basis.The maximum loan i give out is $45,000,000.00usd and the minimum is $2,500.000.00usd. To the right, you must be an adult who is over 18 years old. You must also specify the amount of your loan, or in pounds, euros or U.S. dollars. Your answer now given us some of your information before we give you the loan terms and repayment of installments on the loan amount. Personal Loan Business Loan Home Equity Loan A debt consolidation loan For us to proceed, please fill out the application form for a loan, if you are interested in our offer.

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