Franck Lopez: First lesson: Don’t underestimate greed! [ laughing]
Elvira Hancock: Second lesson: Don’t be greedy about your own supplies.
Scarface 1983
Due to all the noise surrounding lending in the market, my focus is now on payday loans and recent discussions with the Consumer Financial Protection Bureau to protect consumers of this product. The CFPB believes payday lenders should control who they loan to and how often a borrower can renew a payday loans each year. These new rules are expected to be welcomed by payday lenders.
Is payday lending a savior to those who are short on cash and have no other options but Freddie the Loan Shark? Or do they trap customers in a cycle that leads to more debt? Visit Bridge Payday Online Loans for more details.
Payday loan borrowers are typically those who live from paycheck to paycheck and are the most risky. Payday loans were originally created to help fill short-term gaps such as when your car needs work or you have a medical issue.
Payday loans trap consumers in a vicious cycle of debt, just like Scarface.
Research on this topic is difficult to take seriously as most of it is funded directly by the industry. See here
Another effort was made by the Consumer Credit Research Foundation, which provides data on industry credit. It showed that people were being affected by the closing of payday loan shops. However, again, the CCRF has been funded entirely through payday lenders, so editorial control is always a concern. It is possible to replicate the findings of any research that draws particular conclusions. Is it possible to replicate the protocols and obtain the same results if someone else follows them?
Payday loans are often not used in the way they were intended. Payday loans are not always used as intended. They can be used to provide quick relief for emergency situations, but they also serve to pay for daily expenses such as rent, utilities and groceries. According to one study, the industry’s business model was designed as a debt trap.
An economic look
Payday loan fees in the United States are approximately $ 3.4 billion annually. 75% of the industry fees are borne by borrowers who borrow 10 or more loans each year. These loans are so small that the lender is charged $ 15 for each $ 100 borrowed.
The average credit card rate is around 20%. However, the payday loan industry claims that this is unreasonable because they operate with a very low margin. It’s not bad to hear 400% per year for a loan for a few weeks. But if you have continuous roll-overs for 52 consecutive weeks, it’s insane. Payday lenders will have enough money to continue to operate if they switch to 36% APR instead of paying 400% for borrowing money.
If they don’t have access to a payday lender, how can the people who really need the money get it? Usurers Families? What if the banks were to fill that void? They are used by an estimated 10 million people each year. But how can you regulate this industry without shutting down the business? Payday loans can reduce financial stress. There are many studies that prove the opposite. Reversals are the key. Big data can help you predict who won’t be addicted by rollovers. Understanding this could be more costly than the potential profits.
Payday loans may be an option if you require $ 300 quickly and market lenders aren’t available due to your credit score. A payday loan may not be the best option.
Let us know your thoughts. Do you think Congress should limit rollovers What is the interest rate? This is a death knell to payday lenders.
