Personal Loan Low Interest

Payday loan businesses under scrutiny

The cash advance and payday loan operations in the US is a multi-billion dollar a year industry. Many working class and lower income Americans view this service as a way to pay for unforeseen expenses. This profitable market has attracted more traditional lending institutions to offer their version of a payday loan called the deposit advance.

There are states that will now put a cap on the rate of interest that payday loan companies are allowed to charge. There are even a few states that prohibit these types of loans in general, not to mention the federal law that payday loan companies must comply with. Until recently, the federal government has had little to no oversight on the established business practices of these companies. Those are now days of old.

Just last week in Birmingham, Alabama, The Consumer Financial Protection Bureau has started to hold hearings on the business practices of payday lending. The newly appointed director of the (CFPB) Mr. Richard Corday has now publicly stated that any financial lending company that offers small dollar, short term loans will now be under examination.

He recognizes that there is a need for true emergency credit, but also not at that risk of harming the consumer’s current and future financial wellbeing. He has said he will spearhead the effort to curb payday lenders that engage in illegal practices that harm the consumer, and when they are found the Consumer Financial Protection Bureau will take the necessary steps needed to eradicate them.

Traditionally payday loans are supposed to only be for two weeks. They are only supposed to provide you with funds so
that you can repay them on your next payday.

The reality of this operation is much different. For Example, you really need two hundred dollars and the interest rate for that two week period is 34 percent you give them access to your checking account and write them a check for $268. When it’s time to pay the balance if you don’t have it, they will not only keep the $68 but add on an additional $68 fee.

This is what is known as roll over debt, when you’re not able to repay the terms. So what ends up happening is that the consumer has to end up trying to make a living on that borrowed money with an interest rate upwards of 500 percent.

Critics and anti-poverty rights advocates are highly opposed to this lending practice being allowed to take advantage of people. They plain and simple accuse this practice of being nothing more than price gouging, and that there should be laws against it.

The long term effects of payday loans can be devastating to the regular consumer. Another example is of a woman who took out a $1000 dollar loan to repair her car. And at the end of the two weeks she was unable to repay the loan. After nine months she has paid over $1800 on that loan, with over six hundred more dollars to go. The money has been directly debited from her paycheck and now she cannot pay her primary bills.

The sad truth about Americans who use payday lenders is that they are generally under the average household median income and have fewer assets and a lower net worth than the average American, making these types of loans all the more difficult to finance and pay off quick.

Personal Loan Low Interest