Who are the Victims of Payday Loans?
Payday loans have been known to place people in large debts that are almost impossible to pay off. The loan usually begins at $500 which must be settled within two weeks. Then the payday loan can be extended for another payday and perhaps into a few more months. It is a type of loan in which the credit history of the borrower is never checked. In exchange for the quick and guaranteed loan approval, the payday lender is given either a post-dated check or an authorization to automatically withdraw from the borrowerís checking account.
This nature of payday loans implies that it targets people who are in dire need of cash and without better financial means to obtain such cash. In other words, the payday lenders intended to provide loans to people who may not have enough financial capability to settle the loan. This keeps the borrower in debt until the total amount to be paid has increased five or six times higher than the initial loan. The borrower essentially becomes a victim of the payday loan trap.
To prove that payday loans are actually victimizing people instead of giving financial help, here are the descriptions of people who actually obtain payday loans.
One group of payday loan borrowers is composed of people who belong to the low income group. They can be people who are in welfare-to-work programs, retirees who rely on their monthly pensions, and military personnel. The common characteristic of these people is that they have a steady source of fixed funds every month but such funds are barely enough to meet all their expenses. And if the income receive every payday is barely enough, it means that the chances of paying off the payday loan are slim.
Another group of payday loan borrowers is made up of people who have poor credit history or poor credit ratings. They donít pay their bills on time simply because they donít have the money. And they have probably maxed out the limit of their credit cards. Without knowing better alternatives, these people view payday loans as the only way to quickly obtain cash. Unfortunately, they place themselves in a worse situation when they get payday loans.
And a third group of payday loan borrowers is composed of students and young people who can be considered financially naÔve. Young people with new jobs may think that payday loans are new financial opportunities opened for them. They are probably not aware of the huge interests that entail payday loans. The students, who do not work or work part-time, should not be taking out payday loans, simply because they never get decent paychecks. But the unscrupulous payday lenders cater to students as well. These students and young people realize too late that with payday loans, they end up paying fees that are higher than the amount they borrowed.
And finally, the last group of payday loan borrowers is composed of people who are already in huge debts. A research conducted by the Center for Responsible Lending (CRL) in 2003 showed that about 91% of payday loan borrowers already have five or more outstanding payday loans. Some borrowers even have as many as 13 payday loans in one year.
Based from the above descriptions, the groups of people that take out payday loans do not have the financial capacity to recover the debts incurred from payday lenders. Instead, they become victims of payday loans.
One of the major types of loans in demand is the home equity loan. There are others as well, like the personal loans which are issued instantly without any need of credit by the pay day lenders according to the financial capability of the borrowers. There are a numerous options for applying loans online from the different loan companies with the reasonable interest rates. The credit cards are issued to cover the bad credit need loan for the individuals who seeks the debt consolidation for the secured future. The home loan bank has introduced the new policies of loan consolidation by reducing the home equity loans for the borrowers. The financial opportunities are offered by the different banks with the option to compare credit cards of different banks in accordance with the charges of interest.