Pay day loans are often demonized by a group which seems to fail to recognize that some people who misuse them are not actually the victims of legalized loan sharks but just lack the personal responsibility to deal with their finances. The same well meaning groups in both America and the UK take it upon themselves to try and protect these poor misguided victims from the clutches of pay day loan lenders, by campaigning to make them illegal. They do not understand there are far shadier lenders to take advantage of the desperate if pay day loans aren’t available.
The fact is that pay day loans are meant to be used as a short term loan to tide those short of cash over to the next pay day. Many people who do use pay day loans use them for just this purpose: for emergency borrowing as they do not have access to more standard forms of credit or loans. They understand the product and it suits them, and in many cases it is actually far cheaper to use a pay day loan than a credit card or other means of borrowing.
Those who work to make pay day loans illegal are effectively trying to exclude those who intermittently rely on them without any problems, from a source of legal lending. If they are successful it would leave illegal lenders such as loan sharks as the only viable alternative. It is a simple fact that payday loans can and will be abused by some, who would also abuse any form of finance which was made available to them.
The very simple facts about pay day loans is they require no credit checks, and are thus available to those with no credit score or those with bad credit scores. They are not available to everyone as some perceive: borrowers must have a fixed income to pay back the loan from on pay day or benefit day, and a current bank account.
Pay day loans are very easy to obtain if one meets the criterion, and the fees can be considered high but they are necessarily so due to their being very short term loans. The APR’s quoted often work out less than other comparable forms of lending, and are much lower in the UK than legal door step lending APR’s.
Pay day loans are becoming far more of a main stream source of borrowing now they are regulated, and it is no longer just those living pay check to pay check who use them. Astute borrowers can find free pay day loan offers via the internet as special introductory deals. These are ideal for a one off quick guaranteed loan which can be approved in minutes. Some pay day loan lenders also offer exceptionally profitable referral schemes.
If used for their intended purpose pay day loans are a non exploitive source of borrowing for those who do not have access to credit. Those who don’t have access to credit number 25% of the American population, and that is a huge amount of people which the ‘concerned to ban pay day loans’ wish to exclude from borrowing money for their own good. It is a sweeping generalization to presume that those without credit have no concept of dealing with their own finances.
In the UK the Office of Fair Trading (OFT) have just ruled that pay day loans have their place as legal lenders and serve a sector of the market which otherwise may have no option but to borrow from less savoury sources. It should, at the end of the day, be up to the potential borrower to appraise themselves of the facts regarding pay day loans, shop round wisely for a good deal, and use them if they choose.