Family Issues

1. Payday loans become a trap and are not used only once as originally claimed by the industry.

Borrowing money from payday companies are usually the alternatives of consumers who are in debt.  Repaying the loan has been a problem for these persons because of the high rates.  As a result, they end up extending the loan by paying $17.50 for every $100 many times over. Consequently, they pay much more than what they borrowed.
Payday lenders assert that they are the lone alternative for financially troubled consumers. The reality is that payday loans complicate the problem.

2. Payday loan rates are way too high, especially given their low risk.

Because of the risks and the high loss ratio, the industry says that the extremely high fees are justified.  Payday loans continue to expand in the state of California and around the United States.  Since it was legalized in January 1, 1997, more than 3,500 payday loan stores have been operating in the state.  There is high profit in the industry.

3. Payday lenders are virtually unregulated.

Compared to consumer finance lenders, payday lenders are virtually uncontrolled

4. Consumers are easily deceived by payday loans.

When consumers are required to pay a post-dated check, the consumers open themselves to illegal threats or collection practices.  For instance, they will be threatened with jail for passing a bounced check, even though the law specifically exempts them from prosecution if the check bounces. Borrowers often issue a check prior to the due date, resulting to a bounced check and consequently, more fees on borrowers.

ALTERNATIVES TO PAYDAY LOANS

A payday loan is not the only option for financial debt problems.  Even before payday loans, dealing with their finances have not been a problem for consumers.

1. Negotiate a payment plan with creditors. Setting up a payment plan to pay financial debts is a cheaper alternative than payday loans.  Many lenders allow partial payments when a payment plan is in place.

2. Credit cards/Secured credit cards. Another alternative is a secured credit card. A secured card is basically a credit card packaged for a savings account ($500 for example). The cost of the savings account serves as the card’s credit line. The amount charged to the card is secured by the funds of the account.

3. Advances from employers. Many employers allow paycheck advances to employees. This is not a loan and is obviously a better choice compared to payday loans.

4. Credit unions. Credit union members are granted small, short-term loans. Joining is relatively easy now that requirements for affiliation are less strict.

5. Overdraft protection. Checking accounts with overdraft protection is offered by most banks. While payday lenders maintain that they have lower fees than bounced check fees, preventing a check to bounce is a much better option in the first place.

6. Lines of credit from finance lenders. Consumers with poor credit rating are granted a small credit line by finance lenders. Amount ranges from $2,000-$5,000 with interest rates ranging 25-35% APR.

Tags: Credit Reports, Unpaid Debts, Bankruptcy, Debt, Bad Credit