Predatory lenders or honest help?

You probably see payday loans advertised on television all of the time. These types of lenders are often known as predatory lenders by their opponents. The reason for this is that these lenders are seen as taking advantage of the poor and unfortunate who barely live from one paycheck to the next. These lenders offer cash advances at interest rates that soar beyond those of other lenders, generally 25% or higher.

The payday loan process

Here is how the process works: let's say that an unexpected expense has come up and you don't get paid for another week. A payday loan direct from a lender is designed to cover this cost. The lender advances you the amount of cash you need, in return you hand them a check for the amount plus an additional amount to cover the interest, and they give you the loan in cash (generally no more than $1,500). When payday comes around for you they deposit your check and the transaction is complete.

Payday loan disadvantages

There is a lot of controversy in regard to payday loans. So much that North Carolina actually passed a law that no longer allows these types of lenders to operate within its borders. So do payday loans take advantage of the poor? Well, nobody forces them to take the loan, but yes, it is probably disadvantageous to apply for such a loan if money is tight from one week to the next because a person can end up right back in the same position they were in the previous week and not be able to make ends meet; thus, creating a vicious cycle of lending.

Payday loan word of caution

However, a payday loan direct from this type of lender can be helpful for those who can afford such a pricey loan. Emergencies do arise where people need some extra cash to cover them until payday. There is nothing wrong with using a payday loan provided it can easily be paid back without being a continual burden on your finances. It is the consumer who has to ultimately make this decision, which is why you should never take this type of loan without being fully aware of what you're getting into and making sure that you can handle repaying the loan.