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03

May

Payday Loans-Trending In The United States

Introduction

These are the basic aspects that form basis for the provision of services by the Dollar Financial Group. They are also referred to as payday advances, and described vastly as loans that ascribe to descriptions such as salary, payroll, and small dollar all combined with the term loan to make complete sense. They are short terms loans that do not require any form of security for them to be offset. Security turns a blind eye to the fact that sometimes this loan is usually attached to the borrower’s payday. It is absolutely safe to say that they are cash advances even though this term can be used to create a whole different meaning, like provision of cash on the basis of prearranged lines of credit like credit cards. These types of loans have total reliance on the previous payroll and employment records of the customer. 



Laws set to govern the dispensation of such loans vary across various states. In a quest to prevent instances where there are overwhelming interest rates; unreasonable and extorting rates, a number of jurisdictions limit their annual percentage rates that lenders of all sorts charge. Others completely outlaw payday lending and some giving maximum liberty to payday lenders with minimal restrictions outlined. The United States has a standard governing rule with a 36%-40% APR set up by the Uniform Small Loan Laws.

Competition and Alternatives

As much as payday loans have been legalized in upto 27 states in the United States, they get favorable completion from other institutions such as credit unions, banks and other major and properly established financial institutions. These are the greatest contributions to the Center Responsible Lending, a forum that was set up to fight against payday loans. Some institutions have been set up to replace the traditionalized payday loans, with modern ones to be able to cope up with technology as well as the dynamic changes in the society today. Such alternatives include PayActive, which allows workers to receive immediate income at a standard fee. There has been the implementation on the redirection of potential payday borrowers to non-profit that offer lower interest rates by a website known as the NerdWallet. Some borrowers are even sent off to the government organizations that offer short term financial assistance. Payday loans come in handy to save individuals from dire embarrassment originating from the social institution of lending to trusted friends and relatives. This in turn helps an individual save a lot of money. 

 

Economic effects

Payday loans were designed to offer consumers with liquidity during emergencies but have over time chosen to divert money away from consumer spending to paying interest rates.

Criticism

Everything that has ever been put up for trial by the public usually encounters a fair share of criticism. Payday loans have been criticized over time as having increased the difficulty in paying mortgage, rent and utility bills. An increase in economic difficulties culminates in homelessness and delays in efficient medical care, even paralyzing the ability to purchase drugs. Payday lowers overall performance and shortens service period among military men. It has been accused of being a premium pricing structure that leads into a debt trap and creates an eternal debtors prison among borrowers.

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