Payday Loans
Why Do They Exist?
Who uses them? Seriously. What is the demographic? When is it a good thing to get a payday loan?
On the one hand, I suppose it’s not completely illegitimate. Assume you owe $250 that you can’t afford, and that your next pay day is a full two weeks out. You could go to a payday loan place, get $250, and pay back $250 + 20% = $300 two weeks later. A $50 fee is pretty heavy, but is in the ballpark of late fees on many credit cards, and is probably favorable to late fees and penalties for failing to pay your power bill.
Now, consider that really bad credit cards charge at most 27% APR, compared to 20% for two weeks, or over 250% APR. A cash advance on a credit card is a better option. One might also consider using the overdraft protection that most banks offer, which is at most 16%.
One could argue that if you don’t have a credit card or a checking account with overdraft protection, payday loans and pawn shops are really your only institutional options. But what about personal options? How does it happen that all of your relations in this world put together can’t spot you some cash for a little bit?
I hear that I’m a rarity. When I buy things, I always pay with a credit card. (In fact, the only exception I can think of are parking garages that only take cash.) I do that because it’s more convenient than cash, faster than checks, and it’s safer for me than every other form of payment. But, get this. Every last one of my purchases is backed with cash, always. I have never once carried a balance.
You see, therefore, why I don’t understand payday loans.
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Those who depend upon the availability of payday loans for unexpected emergency expenses they hadn’t budgeted for must speak up this election day. We cannot allow Ohio’s HB 545 to take away the financial freedom we have, and have been fighting for. This House Bill is not a Robin Hood that will “steal from the rich and give to the poor.” In actuality, it is more like the Sheriff of Nottingham appointing more vassals. Other financial institutions, such as banks and credit unions, are certainly pleased to support such measures for they seek to snatch up the business payday lenders who have been squeezed out of business will leave. Moreover, they will subject consumers to a product that will be even more profitable for banks: overdraft fees. They strive to magnify the “horrifying” 391 percent APR on faxless payday loans, but overdraft protection typically costs in excess of 1,000 percent APR . This further proves their gluttonous intentions to overwrite every other financial institution, like the payday loan industry, and become consumers’ only option when unexpected financial fallbacks occur. Bear in mind that payday loans are typically only two-week loans to begin with, so it’s no doubt a circle and stripe argument. Plus, voting NO on HB 545 will prevent the annihilation of about 6,000 jobs in Ohio, which will support the further destruction to an already suffering economy. Odds are that many who lose their jobs because of the government overregulation will be forced to work and/or live outside of Ohio, which will definitely create a tax and spending power deficit for the state. In conclusion, if you want to help fix your state’s economy and value your rights to financial freedom, vote NO on HB 545 . Post Courtesy of Personal Money Store Professional Blogging Team Feed Back: 1-866-641-3406 Home: http://personalmoneystore.com/NoFaxPaydayLoans.html Blog: http://personalmoneystore.com/moneyblog/