Payday Loans Useful?
There has been a lot written on the subject of the short term personal loan lender, you know the payday loan companies that specialize in lending small amounts of cash to those with no credit at exorbitant interest rates. What I’ve noticed though is that most of these articles you come across are written by the payday loan companies themselves, or by affiliates or others paid to produce content about the lenders.
I was wondering if anyone out there has ever actually used on of these services or maybe knows someone who has? I know that typically we believe that it is only the poor who utilize these types of short term loan schemes, but according this recent article from Wales Online as many as 50% of the loans currently taken out are being taken by white collar workers. Even more astounding (to me anyway), is the claim that 1 out 14 short term loans are being taken out by professionals such as doctors, lawyers and accountants.
Accountants?!? How is that possible? Surely they would be one of the groups least likely to pursue one of these high interest short term loans? I think there are few other professionals who would have such a deep understanding of the interest payments and other alternatives. Yet it seems that even accountants use payday loans. They can’t really be all that bad then can they?
I myself have never taken one of these loans, but I can see the attraction they present if you need money for an emergency and have no other resource. While the APR is certainly high, the truth is that you are borrowing such small amounts that typically the interest payments only come to $20-30. I’m sure it is this number most people focus on, rather than the interest rate. After all, if you can get yourself out of a money emergency for just $20 I think most people would jump at the chance. Depending what you are using the money for, the small fee could be much less than the penalties you would accrue if you didn’t take the short term loan.
So, what does everyone else have to say? Can you give me some real life examples of payday loan usage?
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Use of payday lending is perhaps the foremost indicator of a severe need for personal finance education and desperate financial circumstances. The practice is so lucrative, several Big Banks have gotten into the business. As H.L. Menken said: “No one in this world has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby.” I’d substitute “ignorance” for “intelligence” in this case–that payday lending exists means people aren’t educating themselves about personal finance.
There’s no doubt that is completely true. If they knew even the basics of personal finance they would have an emergency fund to tap when…well emergencies occur.