Do reputable payday loans exist or are they all an inherently bad financial product? Whether justified or not, payday loans get a bad wrap because they are seen by some as a financial product that preys upon non-financially savvy, low-income Americans.
If you are a consumer looking for a reputable payday loan, remember to treat this loan like any other debt: only use it as a last resort (i.e. look for other sources of easy money), know the terms you are getting into, and pay it off as soon as possible. Skip to the bottom for information on credit unions as well as LendUp providing payday loan services at better rates.
The guffaws are plenty when we learn that payday loans can cost consumers as much as 400% in annualized interest. A typical loan of $300 might cost a consumer around $50 over a two week period. But the consumer needed the cash, and they likely chose this place because they couldn’t get it elsewhere. Wouldn’t these businesses go out of business if they weren’t needed or there was a better alternative?
Although there are many different sources of easy money, many aren’t available to low-income consumers. Some argue that the loans actually serve the poor efficiently and without the loans, there would not be as many check cashing businesses to serve the consumers who can’t get a checking account.
Take a second to watch this piece put together by the guys at Reason.TV. As a guy who leans Libertarian and tends not to like consumer financial hand-holding, I like their spin on the issue. I particularly like the part where Joe asks the author about his prior credit card use, highlighting the irony of his opposition to the payday loan industry. I found it interesting that studies have shown that payday loan companies only average a 10% return on their customers after you take into account default rates. Even though the video is a bit slanted, I think they make a decent argument for the existence of the payday loan industry.
After I watched this video, I looked into alternatives to traditional payday loans, and I found that in some states, employers are partnering with local credit unions to provide payday loans at better rates for the consumer. To find these loans I suggest asking your employer or doing a search online for “credit unions payday loans”.
LendUp offers a better alternative to payday loans. Get $100 – $250 loans with declining rates over time, free education and the opportunity to build your credit history where available. LendUp is committed to improving the lives of its customers. They succeed when you succeed, not when you go deeper into debt.
Apply to LendUp in as few as 5 minutes and receive an instant decision. Good credit is NOT required!
Did I leave anything out? How would you get quick cash?
What is your take? Are States and the Federal Government helping or hurting consumers by running these establishments out of business?