Payday loans are small loans payable within two weeks and not supported by any collateral. They are also called payday advances. In the United States, they are often unproductive in that they are meant to meet the regular needs of the borrower such as food and rent. In many states, the interest rates are regulated differently. Payday loans are simple to acquire which makes them attractive to low-income earners who may not easily access other forms of credit. They have helped many people to cater for their emergencies, though many borrowers do not understand them. Below are some amazing facts about USA payday loans which are not known to many:
- Sixty percent of the borrowers pay more interest than the loan amount. Many borrowers delay in settling the loans and they end up being charged an additional penalty for late payment. Additionally, eight out of every ten rolls over the loans multiple times and hence pay more.
- The regulation of USA payday loans is limited. Many citizens desire that regulation be improved. Payday lending is legal in some states and illegal in others.
- The chances of the payday loan borrowers being declared bankrupt are high compared to non-borrowers due to high fees charged. That is why some states are against these loans.
- Most borrowers cannot afford them because the lump sum repayments are high. Those who access them tend to renew or re-borrow. They find themselves indebted every month.
- USA payday loans are addictive. The high interest imposed on these loans makes it difficult for most borrowers to repay; they often become serial borrowers.
- 70% of the borrowers use payday loans to cater for ordinary living expenses such as food and utility bills. Ordinarily, short term loans should cater for emergency needs such as sickness.
- Payday loan facilities in the USA are more dominant in states with extreme poverty characterized by a low unemployment rate.
- USA payday loans are more costly than credit cards and mortgages. This is because they are short-term and the customer has to be charged for ease of acquiring. Credit history is usually not considered.
- Four percent of the loan customers earn a monthly income of over $5,000. The lenders have identified a niche that constitutes of low-income earners who may not meet their basic needs adequately.
- An average payday loan borrower will take an average of four loans every six months. This means that it is very rare to find a borrower with no obligation at any one time.
There is a lot of abuse of USA payday loans. Good loans are productive in that they should enable the borrower to make more money and generate returns to repay. Many payday borrowers use these loans for consumption which makes borrowing a lifestyle for them. They do not bother to find more about the implications of such loans. In any case, it is easy to borrow and they can borrow as many times as possible. The potential borrowers need to take their time to understand the payday loans before acquiring them Windsor ON Cashmax location.