Thoughts about Loans

You might have come across the term “Predatory Lender”, if you have been involved in any sort of financial practices. In simple words, predatory lending is used to address any lending practice that is abusive or unfair for the borrowers. Though this term is often used for addressing gamut lending practices like balloon mortgagees, but mostly, you may hear it in connection with payday loan lending firms.

There are many economists and financial institutions that have defined payday loans as a product whose risks overweigh its benefits. However, in spite of the high interest rate, the consumers aggressively use and prefer this loan option over others. In fact, some of them have been using payday loan for years to pay out their debts and other expenses.

 

Payday Loans – The Perspective of the Consumers

perspectives for customersJust imagine that you are stuck in a situation, where all your credit cards have maxed out and you are stressing over a financial emergency. Would you be willing to accept a financial help with comparatively higher interest rates, but few conditions? I think most of us would answer this question as positive.

This is because when you have a list of bills hanging on your head and when the monthly installments of your loans are due, then you will be desperate to grab any solution that comes along your way. So if you think from the perspective of the consumers, payday loan is a life savior for anyone going through a financial emergency. The consumer turns to this feasible loan option and quick money solution when paying hospital bills, car repairs and other expenses that strike them before their paycheck does.

The cost of loans ranges from $10 to $30 for every $100 borrowed. Suppose, if you need a loan for $500, you can write a check for $590 that dates out in two weeks. But if you are thinking of renewing this loan, then it would be expensive for you.

So, payday loan acts as a band-aid for consumers who have a limited source of funding available but it is undoubtedly an expensive solution.

The reason why people are still willing to avail payday loans, in spite of high interest rates, is because they are the only feasible source available for them to get small loans. Financial institutions due to their fair share of regulations will not lend borrower loans for as low as $500.

Most of the consumers, who have ever availed a payday loan amid an environment where this financial product is exposed to severe criticism, do not consider themselves as victims of the unfair policies of the lenders. This is an opportunity for them to get fast cash for an emergency. Also, majority of the consumers, do not think that the lenders are preying on them, but they take such statements as an insult, especially when they have never been abused. This is the point of view of a typical consumer, who is merely thinking of addressing their financial need on an urgent basis.