Understanding and Avoiding PayDay Loans
Oct 12, 2021
Welcome to avoiding an understanding payday loans. Everyone has seen signs and commercials about payday loans, but what are payday loans? A payday loan is a small, short term, unsecured loan. An unsecured loan is alone not protected by any collateral asset that you own such as a house or a car. This means that they do not look at what you own when you ask for a loan. If the term payday loan doesn't ring a bill, here are some other names for it. Cash advance, short term loan, payday advance loan, fast cash, or fast loan, bad credit loan, deferred deposit transaction, paycheck advance, just to name a few. A person can get these loans through a payday lender. Paid a lenders include a payday loan store, or stores that sell other financial services, such as check cashing, title loans, rent to own, and pawn shops, depending on state licensing requirements. A higher cost payday lending is authorized by state laws or regulations in 32 states. 15 states and the District of Columbia protect their borrowers from high cost payday lending with reasonable small loan rate caps or other prohibitions. Loans are also made via websites and other mobile devices. Online payday lenders are generally subject to the same state licensing laws and recaps of a state where borrowers receive the loans. According to the puke charitable trust, 12 million Americans take out payday loans each year, spending $9 billion on loan fees. The market for payday loans is large and demonstrates how stubbornly popular they are. But why would a person want to take a payday loan? 2016 survey of 7000 Americans by gold banking rates found that 69% of American households have less than a $1000 in savings. Why does this lead to using payday loans? Let's look at an example. Mary is 25. She works a full-time job, but has no savings and bad credit. Unfortunately, Mary has been having car trouble, and finds out that it will take $700 to fix it. Mary needs the car in order to get to work, and since she has no credit and no savings, she takes a payday loan. Mary has no idea how she will come up with $700 plus interest in two weeks, but the loan buys her some time. What will Mary do? Well, should be able to come up with the money in 14 days, or will she be stuck in an expensive and out of control cycle of debt. Watch cycle of debt, payday loan, module two to find out.