Essay on Payday Lending - 1785 Words

Would you pay 390% for a $400 loan? Most people would say no. Many, however, are saying yes. In the industry of payday loans or cash advances this is just the case. A payday advance or cash advance works like this. A borrower has a need arise, whether from bills or Christmas shopping, and they need a small amount of money. Now, their payday has just past and their credit it less then perfect. They do not have a savings account, and due to their credit they do not have a credit card either. So they stop in to a payday lender. The borrower writes a check for $460, and they get $400 in cash. The $60 is the fee for the loan. The lender gives the loan for 14 days, which is until their next payday. In 14 days the borrower has a couple of†¦show more content†¦A person could go the credit union and get a signature loan for just under 13%. Yet, payday lending is still one of the fastest growing businesses. May people believe that is because they prey on the financially uneducated . A good deal of borrowers is those on fixed income or in the lower income bracket. Their credit worthiness is not go, and they may not have any savings accounts. In fact some may have no financial assets whatsoever. The borrowers are apart of a segment of society that the Center for Responsible Lending have dubbed â€Å"unbanked,† According to Payday Lending:Serving the Unbanked by Mike Foley. This segment is primary comprise of the poor. So, when many of these loans are taken out the borrowers can not afford them in the first place. The borrowers only see the small fee for the loan and the fact the company just holds the check, so they see not risk in taking the loan. Most borrowers do not thing about interest rate or just do not care. They have their wants or needs and that is all they can see at the time. The lenders do not really care if the borrower can pay the loan back. Most of these payday stores are open near or in poor communities. Julian Bond, chairman of the Board of the NAACP said, â€Å"visits to day lending stores-which open their doors in low-income communities at a rate equal to Starbucks in affluent ones-are threatening the livelihoods of hard working families and stripping equity form entire communities (Foley). ManyShow MoreRelatedPayday Lending Should Not Be Banned1113 Words   |  5 PagesPhillips WR 121 Does Payday Lending Need to Be Banned? Many financially unstable Americans use payday loans as a means of escape from bills they cannot afford when their low paying jobs do not provide enough for them to live on. In the article â€Å"Many states have cracked down on payday loans. Here’s how lenders still get away with it.† by Jeff Guo, of The Washington Post, payday lenders are criticized as being â€Å"a slippery bunch† but should all payday lending be completely outlawed? 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