Saturday, August 25, 2012, AM | 2 Comments
Payday lenders set very high interest rates for their loans and they also give different reasons for this. In fact, if you listen to their arguments, they appear to be very accurate and to the point and absolutely justified. However, there is another thing to it and they are not always sincere in their justifications.
Payday lenders charge huge interest for their services. The thing about payday loans is that they are unsecured and are given for a short period of time without any collateral or co-signers or anything else.
Surely enough no lender is willing to give credits to borrowers without any guarantees that their cash will get back to them. Credit cards, mortgages and many other regular loans are expensive.
However, they take longer to be repaid and still their rates are much more reasonable than the 3-digit ones charged by payday lenders. In many cases they reach up to 1700% APR. Really, this is not reasonable and not something to accept without real basis for it.
The main justification of payday lenders is by the fact that their businesses won’t be able to exist on the other terms. Still, this is not really comprehensible as very frequently borrowers have to file for bankruptcy in the result of such lending.
The thing is that the target-group of such lenders is low-income and middle-class consumers who live from paycheck to paycheck and they frequently have to apply for the services of such companies.
They are deluded by the fact that payday loans are easy to get and that this is the fastest way to get cash when it is needed most. As they advertize it – three steps to get cash without hassle – this is really very tempting and many customers are led astray by this claims. They are sure that they will be able to repay when it is time but most of the times they fail and appear to have huge debts that go on and on forever.
Many customers frequently forget to read fine print and they have no idea what amount they owe in the end. The consequences often turn to be catastrophic in the end.
Borrowers should be careful applying for such loans as they have all the chances to get into a debt trap faster than they can say “loan”. The advice here is that those customers who want to apply for the service of payday loans should be careful and always read the agreement carefully before signing it. They say that payday loan lenders care about their customers but they never did and never will. All they care about is their profit.
There is no sense in the idea that without such high rates the companies won’t be able to exist and operate and this is the only way for them to be. However, there is no real sense in this at all.
They can function easily on much modest terms but they will never admit it and they will never agree. Thus, the only thing that is left to a person is to be careful and make sure that the case is such a dire emergency that there are no other better alternatives. Payday lenders run businesses and highly profitable ones and customers should be careful and take care of themselves in the first place.
This is a guest post.