The Booby Trap Called Payday Loans |
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Payday loans are by definition
predatory. Payday loans appear on the surface to be legitimate, but are as
vicious as the loan sharks of the 1930s. These modern-day loan sharks break your spirit, by the effect of high, interest rates on minimum-wage salaries. They survive to siphon off all your cash. What makes them worse is that they prey on the people who have been pushed to the fringes of society. Payday loans prey on the working poor, those who live check to check. Most of the time that check will not stretch for the infinite variety of justifiable reasons, such as illness, accident, car repair, reading glasses, dental needs, getting laid off etc. When the requirements exceed the income, these people end up opting for pay day loans. When drowning, it is instinctual to grab anything that can keep you from going under. Payday loans appear as water buoys to them. But once they climb on board, they become aware that they might have fallen from the frying pan into the fire. Yet, industry analysts say that the business is booming; the total payday loans‘ nationwide volume increased fourfold, to $40 billion. Do not let the title impress you. Payday loans, in some states, are not regulated. The average APR (annual percentage rate) for payday loans in one of the unregulated states is 521.21%. That is more than 500% interest! On the East Coast it has gone up, as high as 700% annually. In Washington State, for example, the annual rates on a two-week payday loan are capped by law at just above 391%. But the effective annual rate on short-term loans is even higher, and there are internet lenders, who are not subject to these limits. Also, some payday loans lenders near military bases, in other states charge annual rates as high as 780%. So, if you borrow $300 and the cost of the loan (the fee you pay the lender) is $45, but can't repay the loan when it's due, and renew it three times, you could end up paying $180 in fees alone. As a result, that quick fixes never really fix anything is a lesson that many have come to learn the hard way. And quick money, through non-regulated payday loans or instant credit is the quickest way to lose everything you're trying to fix. Therefore, there is not much that anyone can do, to rescue you when drowning in the debt accumulated from the unlimited interest rates of these lenders. That is why it is important that you understand your present and future financial situation before you obtain payday loans. If your relationship with the payday loans lender is a onetime deal and there is no late fee, you get away with only a slight money loss. But the very nature of the problem that has you in the loan office, to begin with, would logically make it impossible for you to pay back the payday loan on schedule. So, if you don't have the money when you walk in, it is almost an air-tight guarantee that you will not be able to meet their payments. The good news is that there are people who care and are demanding that these payday loans be regulated or prohibited. One case in point is New York and North Carolina. But there is the larger issue of poverty attached to the whole problem. And the non-profit organizations need to address both problems before a solution can be found. And since the problem of poverty is multi-layered, there is no quick fix. Nonetheless, every step is an essential part of the solution. And to remember how close each of us are, to being the one who gets pulled under in the unethical business of payday loans, is a beginning to the end. |
