Why Payday Loans are Illegal in Many States

We have talked a lot about payday loans on this site, everything from payday loans actually are, and the majority of people that tend to end up using them. Throughout all of our articles, we have expressed that payday loans are not the best form of loans out there for those experiencing financial hardship. For those who are in a financial crisis, they should first look to the multiple alternatives to payday loans versus just immediately going for them. This is especially true for people who are wanting to get a payday loan just to pay off routine bills rather than bills that pop up as a one time external circumstance such as in the case of a natural disaster wrecking your home.

 

So what are the other options to payday loans and how can you use them to your advantage instead of having to suffer the often ridiculously high APR of payday loan institutions?

 

First of all you can use places like pawnbrokers or credit union loans that lower APRs. However, credit union loans are not as quick of a turnaround as payday loans are, and take a longer time for actual approval to get the money into your pocket. One of the cheapest methods to get a loan is just to ask your employer for an advance on salary – basically an advance on wages earned but unpaid for in that period. This can be very useful and it saves you a lot of the headache and APR nightmares that are associated with payday loans. Make sure if you do this you do not get yourself into a worse position by overspending all your money, you want to make sure you budget properly since your next check will be significantly lower from your employer if you do this.

 

Other methods outside of payday loans include emergency community assistance plans, small consumer loans, cash advances from credit cards (often have a much lower APR than payday advances from lenders), small consumer loans and of course direct loans from family and friends. All of these are typically much better deals than from a payday advance institute and will help you quash your financial burden better rather than hurt your financial position.

 

Other methods include looking for ways to earn more money. There are hundreds of ways to do this. You could get a part time job in the evenings. These part time jobs do not need to be anything where you actually have to go to a place to work either, they can be freelancer positions such as online content writing. Often these kind of jobs can snowball into becoming very lucrative for you down the road. You just need to remain consistent and keep doing what works and eventually you will break through. Earning more money is typically more fun than getting a loan whose debt will be hovering over your head anyhow.

 

There are a TON of options for you besides payday loans, remember that. You do not ever need to feel like you are trapped in a financial bind, there is hope and there are numerous ways out of debt that do not require the incredibly difficult route of payday loan debt hardships.

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Alternatives to Payday Loans

We have talked a lot about payday loans on this site, everything from payday loans actually are, and the majority of people that tend to end up using them. Throughout all of our articles, we have expressed that payday loans are not the best form of loans out there for those experiencing financial hardship. For those who are in a financial crisis, they should first look to the multiple alternatives to payday loans versus just immediately going for them. This is especially true for people who are wanting to get a payday loan just to pay off routine bills rather than bills that pop up as a one time external circumstance such as in the case of a natural disaster wrecking your home.

 

So what are the other options to payday loans and how can you use them to your advantage instead of having to suffer the often ridiculously high APR of payday loan institutions?

 

First of all you can use places like pawnbrokers or credit union loans that lower APRs. However, credit union loans are not as quick of a turnaround as payday loans are, and take a longer time for actual approval to get the money into your pocket. One of the cheapest methods to get a loan is just to ask your employer for an advance on salary – basically an advance on wages earned but unpaid for in that period. This can be very useful and it saves you a lot of the headache and APR nightmares that are associated with payday loans. Make sure if you do this you do not get yourself into a worse position by overspending all your money, you want to make sure you budget properly since your next check will be significantly lower from your employer if you do this.

 

Other methods outside of payday loans include emergency community assistance plans, small consumer loans, cash advances from credit cards (often have a much lower APR than payday advances from lenders), small consumer loans and of course direct loans from family and friends. All of these are typically much better deals than from a payday advance institute and will help you quash your financial burden better rather than hurt your financial position.

 

Other methods include looking for ways to earn more money. There are hundreds of ways to do this. You could get a part time job in the evenings. These part time jobs do not need to be anything where you actually have to go to a place to work either, they can be freelancer positions such as online content writing. Often these kind of jobs can snowball into becoming very lucrative for you down the road. You just need to remain consistent and keep doing what works and eventually you will break through. Earning more money is typically more fun than getting a loan whose debt will be hovering over your head anyhow.

 

There are a TON of options for you besides payday loans, remember that. You do not ever need to feel like you are trapped in a financial bind, there is hope and there are numerous ways out of debt that do not require the incredibly difficult route of payday loan debt hardships.

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The Positives of Payday Loans

Payday loans or cash advances, are thought to be used only for emergency situations. Honestly, considering the extremely high annual percentage rate (with APRs that on average range from 36-46%), cash advances or salary loans as they are sometimes called should be used in only the most dire of emergencies. The sad truth is that most borrowers who take out a payday loan, are not people suffering underneath sudden hardships but rather people borrowing to cover everyday expenses that are part of their routine living. The problem with this, is that eventually the allure of quick cash from a payday loan will end up snowballing into a monstrous amount of debt that the borrower will not be able to escape from.

 

So who is actually using these payday loans? What are the demographics that make up the customer base for payday loans industry that has a multiple billion dollar booming industry?

 

Well, a study done by The Pew Charitable Trusts suggest that “Most payday loan borrowers are white, female, and are 24 to 44 years old. However, after controlling for other characteristics, there are five groups that have higher odds of having used a payday loan; those without a for-year college degree; home renters, African Americans; those earning below $40,000 annually, and those who are separated or divorced.”

 

Of course, since most of these people borrowing money from these cash advance lenders are using the money just to cover ordinary expenses, they ultimately end up being in indebted for an average of five months of the year before being able to pay off these small loans that balloon into big payments thanks to the very aggressive annual percentage rate.

 

The study by Pew is also reflected with the study done by the Federal Deposit Corporation, also known as FDIC, in a study they performed back in 2011. The FDIC study found that recent immigrants, black and Hispanic families, and of course single parents were the biggest users and customer base for payday loans.

 

Another common trend amongst payday loan users and borrowers is that their annual income tends to be lower than $40,000 a year. This makes sense, considering most USA cities it becomes very difficult to make a living on less than $40,000 dollars a year.

 

According to the Texas Office of the Consumer Credit Commissioner which collected data in 2012 around cash advance users, they found that refinances accounted for $2.01 billion dollars in loan volume versus the the $1.08 billion in initial loan volume. What does this mean? It means that more people are getting more into debt with their payday loan just trying to pay it off then they were before taking out the initial payday loan.

 

That should be a tell-tell sign with how dangerous a payday loan can be for someone looking to take one out for their personal hardship. If you are looking to get a payday loan, make sure you first fully understand what you are getting involved with first. If possible, make the idea of a payday loan the LAST option and explore other options first so you do not end up just snowballing your debt to a ridiculous level.

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Who actually uses payday loans?

Payday loans or cash advances, are thought to be used only for emergency situations. Honestly, considering the extremely high annual percentage rate (with APRs that on average range from 36-46%), cash advances or salary loans as they are sometimes called should be used in only the most dire of emergencies. The sad truth is that most borrowers who take out a payday loan, are not people suffering underneath sudden hardships but rather people borrowing to cover everyday expenses that are part of their routine living. The problem with this, is that eventually the allure of quick cash from a payday loan will end up snowballing into a monstrous amount of debt that the borrower will not be able to escape from.

 

So who is actually using these payday loans? What are the demographics that make up the customer base for payday loans industry that has a multiple billion dollar booming industry?

 

Well, a study done by The Pew Charitable Trusts suggest that “Most payday loan borrowers are white, female, and are 24 to 44 years old. However, after controlling for other characteristics, there are five groups that have higher odds of having used a payday loan; those without a for-year college degree; home renters, African Americans; those earning below $40,000 annually, and those who are separated or divorced.”

 

Of course, since most of these people borrowing money from these cash advance lenders are using the money just to cover ordinary expenses, they ultimately end up being in indebted for an average of five months of the year before being able to pay off these small loans that balloon into big payments thanks to the very aggressive annual percentage rate.

 

The study by Pew is also reflected with the study done by the Federal Deposit Corporation, also known as FDIC, in a study they performed back in 2011. The FDIC study found that recent immigrants, black and Hispanic families, and of course single parents were the biggest users and customer base for payday loans.

 

Another common trend amongst payday loan users and borrowers is that their annual income tends to be lower than $40,000 a year. This makes sense, considering most USA cities it becomes very difficult to make a living on less than $40,000 dollars a year.

 

According to the Texas Office of the Consumer Credit Commissioner which collected data in 2012 around cash advance users, they found that refinances accounted for $2.01 billion dollars in loan volume versus the the $1.08 billion in initial loan volume. What does this mean? It means that more people are getting more into debt with their payday loan just trying to pay it off then they were before taking out the initial payday loan.

 

That should be a tell-tell sign with how dangerous a payday loan can be for someone looking to take one out for their personal hardship. If you are looking to get a payday loan, make sure you first fully understand what you are getting involved with first. If possible, make the idea of a payday loan the LAST option and explore other options first so you do not end up just snowballing your debt to a ridiculous level.

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What are payday loans?

Payday loans are typically something you want to avoid. However, if you are asking yourself if payday loans are a good or bad option for you, well you might be in need of one. Basically, payday loans go underneath several different names – anything from payday advances, salary loans, payroll loan, small dollar loan, short term or cash advance loan – all of these fall underneath the payday loans category.

 

Basically, the only thing you really need to get a payday loan is that you have a job of some kind with that has a traditional pay day. However, this is not always required either. Many places give out payday loans to people who do not have employment, at least in the traditional sense. Where the name comes from though is that you are taking an “advance” or pulling out money from a future paycheck of yours to have that money now.

 

It is almost always a bad idea to get a payday loan because of how much the interest is, however it is sometimes the last option and the best option for you depending on your situation. The advent of new legislation within the USA and different states has also brought the payday loan industry up from its more shady practices and made it into a more ethical business for people to operate within.

 

Many jurisdictions now limit the APR that payday loan institutions can lend at. If you are not familiar with APR, it stands for annual percentage rate and is the rate of interest that your payday loan is being charged at. In fact, payday loans have earned such a bad name in some places that many regions completely outlaw them altogether, forcing these operators out due to usury laws. While those regions that still do offer these salary loans, they usually start with an annual percentage rate that is governed by the Uniform Small Loan Laws at 36-40%.

 

Which, in case you did not notice, is extremely high interest.

 

The crazy thing about about payday loans is the inherent risk. Most lenders would say payday loans are hardship loans and thus have a higher rate of risk than other forms of loans. However, studies done have shown payday loans provide no extra risk than any other form of lending. Which is really crazy when you think about it, because these loans have a fast turn around time, extremely high interest rates, and people are looking for them every single day to help them get past moments of hardship in their life.

 

So being a payday loans lender sounds like it has a lot of benefit. Because of this benefit and shady business deals though, governing legal bodies have cracked down hard on the cash advance business industry for usury and turning their customers small debt into giant balloons of debt relatively quickly due to monstrously large annual percentage rates that outstrip almost any credit card you could imagine.

 

If you need money, you are almost better doing anything else BUT getting a payday loan. And that is a bonafide fact!

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