Recently, the
payday loan industry has been scrutinized for unsavory practices, which may
lead some people wonder why anyone uses these services at all. With so much
negative press condemning the industry, it makes it hard for those who have
never used such services to understand how lenders are keeping their businesses
alive. Is the payday loan industry surviving the media onslaught or are their
services becoming obsolete?
What many fail to
understand is that the industry acts as a safety net for individuals across
America. Many people face unexpected life situations that drive them to the
payday loan lender. From sick kids to broken down cars, unpaid electric bills
to a need for groceries, these convenient and quick loans are used for a
variety of legitimate reasons. As such, the industry provides a service for
individuals who may otherwise be forced to go without. This is particularly true
for people who have little or less-than-perfect credit. Lenders do not conduct
credit checks; the only stipulations for borrowers is that they must be
employed and have a bank account with direct deposit. If they meet these
criteria, borrowers can acquire a small loan that may be the very thing that
helps them survive between paychecks.
Admittedly,
payday loans are expensive in the long run and many people become dependent on
them by entering a cycle of repeat borrowing that is difficult to break. Because
these loans have short pay back periods and incredibly high interest rates,
borrowers often cannot pay back the loan in full and on time, as agreed upon in
the loan contract. To surpass this conundrum, individuals often roll over the
loan into the next week. This can cause a surplus of financial problems,
including severe credit damage if the loan isn't repaid.
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