Payday Loans, Begin With the Facts

By: Louise Green

In another article I wrote, I researched information about payday loans; the benefits of getting one and some of the pitfalls too.
Basically a payday loan is a quick cash advance that a full time employed person can apply for when expenses excede
your monthly salary. Since that happens to alot of people, these types of loans can be helpful in a pinch. There are lending
establishments you can go to, though applying online is faster, so is the price comparison process.

As with any larger purchase or lending procedure, the consumer needs to get as much information as possible to make a
savvy choice that won`t cause them to get into an even worse situation. Payday loans like credit card cash advances come
with hefty fees, which is why I also recommend shopping for the best rates with a reputable company. Something also to be
considered are alternatives to these payday loans such as working out payment plans with creditors, credit union loans (if
you belong to one), or emergency assistance programs that provide help with heating or cooling costs for low income families.

But what happens to the unwary borrower when there are less than reputable lenders setting up shop in local areas? In some
urban areas there are more pawn shops and payday loan establishments than fast food restaurants. What has been observed is
that there is a seedy side to this type of lending that tends to prey on low income people and minorities. The lenders charge very
high fees for these loans too, making them difficult to pay back. A $300 payday loan might end up costing a borrower $700
when all is said and done. This type of leeching usually turns the one time user of the system into chronic borrowers who end up
continuing to pay ridiculous interest rates. What is of interest to note is that payday lenders are exempt from usury laws which
places a limit on annualized interest rates. You wouldn`t dream of applying for or even using a credit card with an annual rate
of 35%. I certainly wouldn`t! Yet some of these lenders charge what would add up to an annual rate of over 400%. These types
of lending outlets tend to be tightly bunched together in lower income areas and way out number conventional lending institutions
and banks where people would receive a fair deal and the competitive current interest rate on a short term loan. The disturbing
thing about the lenders lacking integrity is that they do target lower income people who may already be in a cycle of dept and
struggling to make ends meet. Specifically targeted are African Americans, Hispanics, and single working mothers.

Consumer affairs groups, local councilmen, and minority leaders and representatives have addressed the issue of predatory
lending in an attempt to put a stop to these unethical lending practices. Eugene DeWitt, political action chairman of the
NAACP`s D.C. branch has said "They prey on the weak and those who believe that have no other options. If they don`t want
to play ball, we should put them out of business." He also urged that there be a cap set on the interest rate they are allowed
to charge for their loans. It`s no surprise that Senior Advisors of the Community Financial Services of America which represents
most of the 20,000 payday loan firms in the U.S., expressed that imposing a rate cap of around 24% would drive many out
of business. What does that say about these lenders? I think it goes beyond greed and predatory lending and borders on
financial vampirism. This is an industry that is well aware of their target demographic and then sets up shop where they are
in close proximity to those areas. Fortunately, this situation has caught the attention of many state representatives as well as
community leaders who are in a position to craft legislation to curtail predatory lending practices aimed at minorities. It is my
hope that everyone have access to relevant information about borrowing so that they can get a loan they qualify for and can
handle, with terms that are standard to honorable lending institutions. A link to more specific information is provided in the
bio box.

Payday Loans
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