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Short Term Loans California

A Bank Payday Borrower Took Out 19 Loans on Average in 2013

While much of the short term cash advance stories have revolved around the traditional online payday loan lenders, it seems that there is a hidden market which has received little emphasize. Payday loans are a good way of solving pressing financial needs for consumers who are in bad credit. Considering that consumers have been toiling with bad credit effects created from the massive and unplanned borrowing, which occurred prior to and during the economic recession of 2007, it is certain that these people are in dire need of cash.

Many of the consumers do not have saving for emergency expenses although they may be meeting their daily financial needs. Banks have entered into payday lending under different names such as fast cash, early access, checking account advance, and direct deposit advance. These loans attract high interest rates but they are worthy for the consumer who is ailing in debt and has no other means to finance emergencies.

It is probably true that consumers are benefiting from these short term loans. However the big question is: are the consumers really solving their financial problems? Perhaps not! Studies show that consumer who borrow payday loans are more likely to get into other financial problems like credit card delinquencies, overdraft fees, unpaid medical bills, closed bank account, and to extreme cases bankruptcy and foreclosures.

As the traditional banking institutions continue to offer these short terms loans with high interest rates, they also need to factor in the future borrowing ability of the consumer. This is the same consumer who is likely to make a repeat business. The short term loans could be making short term gains and profits for the banks but destroying the long term borrowing ability of the consumer.

Critics argue that such loans could lead to harmful debts, which could affects the borrowing-power of the consumer meaning that banks may soon lock out the consumer again due to poor credit scores and huge indebtedness. If a payday borrower takes 19 loans, and on average pays $15 for every $100, then at the end of the years, the consumer will have parted with $285 for the $100 loans he takes throughout the year.

This means that the payday loans are not actually short term lending because they compel the consumer to be a “repeat customer”. However, this repeated borrowing is caused by lack of funds to meet emergency financial needs. It is not a positive lending but actually a predatory lending for the consumer who has no dollar reserves in bank accounts to pay for the pressing financial needs. This circle of indebtedness is actually harmful to the consumer.

There is need for the consumer to learn how to manage finances when in bad debts. It is important that they cut down their spending habits and save for emergencies so that they do not result to borrowing short term loans whenever they are in need of emergency finances.

When used properly, payday loans can help consumers in need of cash but this should not be the order of the day. These loans should only be one-time borrowing aspect but not repeated borrowing. Those who manage to borrow infrequently benefit from these loans. They are able to prevent hefty fees levied on late credit card balance. They are also able to repair their damaged vehicles so that they commute to work conveniently. These short term loans are also used to cater for college fees so that those undertaking studies do not miss their studies.

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Short Term Loans California