Instant Payday Loans Don't Trick the Borrower

[Jun 3, 2009.]

 

It’s been the popular belief that instant payday loan lenders are out to trick borrowers into disgraceful repayment situations. However, recent revelations point to the fact that many borrowers know what they’re getting into beforehand. Check out the evidence for yourself and decide. Payday loans can be a godsend, if you know how to handle them.

Instant Payday Loans Earn a Victory
The payday lending front has won a remarkable victory in Ohio. Despite lawmakers’ attempts at creating a ceiling for interest rates, lenders are lending short-term loan money that follows a different set of regulations. Lenders see this as a victory for borrowers who utilize the short-term loans to get them out of difficult financial situations.

The creative approaches lenders create may signal a willingness to work with borrowers in need. And this is especially critical as lawmakers bolster their efforts in making payday lending less accessible to the general public.

Payday Loans in a Chain
The problem that many borrowers run into is accepting loan money that they know they can’t pay back in a timely fashion. For example, ABC News cites borrowers who take on a string of high-interest instant payday loans when salaries run dry. And while the burdening economy is cause for alarm, borrowing money to satisfy monthly debts is a recipe for disaster.

Payday loans were never intended to be used that way. Rather, they’re emergency sources of capital for borrowers who are hard hit by surprise financial burdens. Think auto repairs, medical bills and fines--not the house payment of utility costs.

Borrowers Know the Deal
Wall Street Journal columnist Robert DeYoung believes that borrower go into the situation knowing full well what they intend to do. He cites a wealth of studies that show borrowers are more informed about the potential situations than lawmakers believe. Aside from being well-versed before they are allowed to sign for payday loans, they’re given written information on the repayment expectations of the lender. According to a January 2009 study by Gregory Elliehausen at George Washington University, half of almost 1,200 borrowers considered other alternatives before choosing instant payday loans.

Also, the shunning of payday lenders by the mainstream financial segment makes it more difficult for them to provide meaningful information to potential borrowers. However, borrowers must provide proof of a checking account, so the relationship between the two is inherently indelible. More cooperation would improve the credit scenario for all.

 

About Author:

Kelly Richardson is a freelance writer, marcomm consultant and digital entrepreneur. He’s written content for Fortune 500s Google, Yahoo!, Microsoft and Wells Fargo. Find out more about him at kellyrichardsoncopywriting.com.