Payday Loans, A Healthy Alternative
Over and over I am bringing the attention to the payday loan industry, and really how it is not necessarily taking advantage of consumers. I couldn’t resist a good post on the Payday Pundit, who brought up some good points about a payday loan.
“Let’s consider some alternatives for the working mom who is short $100 until payday, 14 days from now. She could get a $100 payday loan, pay $15, and the APR for that two week loan would be 391 percent..
She could also choose to write a bad check and pay an average of $48 in NSF and merchant fees. That would be a comparable APR of 1,251 percent!
Even if she has courtesy pay with her credit union, the average fee is $25, or an APR of 650 percent. Another option for her might be to not pay the $100 minimum balance due on her credit card, resulting in a $26 late fee—678 percent. If she chooses to not pay her $100 utility bill which may result in a $50 late or reconnect fee, that’s a comparable APR of 1,304 percent!
The argument can be made that by securing a payday loan to solve her cash flow needs, this woman is taking a proactive approach to her financial dilemma.
The Center for Responsible Lending indicates the 11 states that banned or limited payday lending saved consumers $1.4 billion in fees in 2006. But eliminating local payday lending activity does not eliminate the need for emergency cash loans. People still come up short prior to payday and the center does not address how these consumers managed their cash-flow problems. If they had to use one of the other alternatives, or had to drive to an adjoining state that made payday loans, or used the Internet to get an even higher priced loan, it is possible consumers in these states paid even more to solve their cashflow problems.”
This just keeps going back to the fact that there are bad with everything, and if you abuse the use of a payday loan you will NOT be in a better position. However, as Credit Union National Association and the National Credit Union Foundation state there are other alternatives that could be worse for a consumer. Education is key with payday loans and any other type of financial solution customers choose to take.
Question is, the holidays are now here and there are going to be families that need those gifts and food on their table. Is the payday loan the smartest solution for that consumer? Leadpile Lead Exchange will be here no matter what the answer to that question is, to provide the service to the consumers that DO need this temporary loan.