Payday loans have gotten a bad rap lately, because what some argue are scandalously high interest rates and mortgage lending, but when payday loans and their costs are stacked up against the fees of traditional banks, another villain starts to appear.
The majority of payday lenders offer short-term personal loans that carry an average cost of between $ 12 and $ 22 per $ 100 borrowed. (a single interest rate of 12% - 22%) The repayment period is usually two to four weeks and the payments are automatically charged from the same consumer bank account as the funds are deposited at the time of the loan. Counterparties of payday loans claim that if the percentage of one of these loans is depreciated over a full one-year period, the annual percentage may amount to or exceed 200%. Obviously, an APR seems to be 200% daunting, but it is also true with the question "Why would counterparties of payday loans - or some, attach an annual percentage of a loan that only covers a two to four week period?" We begin to see the real the self-service of the villain when answering this question.
Most groups strongly oppose short-term personal loans and the payday lenders offering them consist of major banks and other traditional lenders. They claim that they oppose payday loans to protect US consumers. In reality, if we look at a typical scenario that involves these so-called "protectors," another story takes shape.
The odds of getting a loan from the bank in less than 24 hours for even a small amount are narrow to none, especially if consumers need something less than perfect credit. Without the opportunity to get a quick payday loan, the consumer may be forced to continue and write checks for the bills that know that there will not be enough money in the bank to cover them. Transmission charges at most banks come in at around $ 35 per bad check and are automatically charged from the consumer account as soon as the next deposit is made. If the deposit is made after the end of the billing month, further late fees can be added - further increase the debt amount to the bank!
Now let's say that the consumer had to write 3 small cash checks that a total of $ 100 to pay these bills is $ 35 fee per check fee, so if the consumer writes three cash checks checks that a total of $ 100, the fees would be bank charges to the consumer $ 105 or $ 35 for each bad check written. (a single interest rate of 105%) If we depreciate that amount in an annual percentage - as the banks do - when they argue against payday lenders, the bank interest rate on bank credit exceeds 1,000% annually before late charges are added.
In order to make matters worse in this hypothetical credit credit situation, the consumer is likely to be charged between $ 20 and $ 45 by the three suppliers to whom the bad checks are written, so the cost of NOT accessing a payday loan climbs even higher. In addition, it is deliberate to write a bad check against the law and punishable by imprisonment in most states. Despite what the big corporate banks and their lobbyists might want to believe, when we take an objective look at the real world, it becomes very clear that payday lenders actually offer a valuable service to middle and low income consumers who otherwise have limited options with one default bank account.
American consumers need payday lenders. If there was no need for payday loans and it was not a profitable solution to an existing problem, business would not flourish throughout the country. "Traditional banking institutions not only offer the flexibility and distribution of short-term cash loans in the same way that payday lenders do ... so it's an industry that has actually filled up the gap for many Americans - most people use the service wisely and efficiently." says William Janus, owner of three payday loan stores in Missouri.
The argument for and against payday loans promises to continue and grow in the coming year and in the forefront of the packet opposing payday loans are likely to be such bad guys disguised as bank presidents who see the payday loan industry that intrude on their fine profit margins being comfortably hidden in bank overdrafts and late fees. All the while they take out these scandalous charges in the name of "protecting" the American consumer.
To protect yourself, make sure you are aware of all bank charges that you are exposed to and if the fees are subject to increase or increase with late fees and additional revenue. You can find payday lenders who are clear of any complaints with the Better Business Bureau or Federal Trade Commission by conducting an internet search for "best online payday loan reviews".