Payday Loans Report - The Good, Bad & Ugly
Frequency of Use
Like any financial product - there are giant pitfalls if Payday Loans are not used correctly. In practice, Payday Loans are to be used for short term financial emergencies. The truth is over 60% of payday advance loan consumers do not use these short term loans for only the occasional 1-3 times a year emergencies, they use them as an over-priced credit line.
Payday Advance Loans can be a great help for consumers who need emergency cash, but they can really hurt consumers financially if they use them too often. When borrowers use these loans over and over again, they are paying a added premium on their wages. According to The Washington State Department of Financial Institutions, 19% of consumers use Payday Advances at least once a year and 11.5 % of consumers use Payday Advances at least twice a year. You can view this report by clicking here.
The problem lies with the consumers that use these loans over 10 times a year. They are paying more interest and slowly falling into the payday loan trap.
If a consumer uses these loans more than 10 times a year, they are likely paying 500 or more in interest to their online or local payday loan store.
Of course that is not bad compared with compound interest of credit cards, or the super high interest consumers pay the first few years of a home mortgage. But and extra 500 or 1000 in interest can add up over a year period.
When payday loans cause big damage
There are other factors to consider when overusing payday loans also. MercuryNews.com reports on the effects on payday loan borrowers and filling for Bankruptcy. http://www.mercurynews.com/opinion/ci_13620914 They cite a report from the group "The Silicon Valley Community Foundation" According to this study, payday loan applicants whose loans are approved are twice as likely to file for bankruptcy within two years as applicants who are rejected. The pileup of fees is the primary reason.
The bottom is this: Too much of anything is bad for you, and Payday Loans are no different. Misusing these types of financial products can lead to cash flow and legal issues. Used with care, Payday Loans can help consumers avoid fees, and manage a short term financial crisis.
Apply Now!
If you want more information on Payday Loans, you can also visit these websites:
Community Financial Services Association of America (CFSA)
Online Lenders Alliance
VAPL
The Federal Trade Commission
Payday Pundit
Advance America
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