Bad Credit Payday Loans

Payday Loans for Bad Credit in the United States

Payday loans, Cash-advance loans or Check-advance loans, in General

Payday loans, sometimes called cash-advance loans or check-advance loans offer borrowers short‐term funds at very high interest rates that are not always clearly disclosed. On average, payday lenders charge fees of roughly $16 for a $100 two‐week loan. If borrowers miss payments, fees can begin to accumulate, resulting in extremely high total payments. Payday loan borrowers are paying nearly $4.2 billion in fees annually, according to some studies.

Even when rates and penalties are disclosed, borrowers in desperate need of cash may agree to disadvantageous loan terms. Many times, these borrowers’ financial resources have already been depleted by an emergency, sustained unemployment, or illness. Relying on payday loans to make ends meet can create a debt‐and‐fee‐spiral that some people may find extremely difficult to exit.

The Consumer Financial Protection Bureau was established to provide federal supervision and oversight over a full range of financial service providers that consumers rely on–from banks and credit unions, to payday lenders and independent mortgage brokers. President Obama has nominated Richard Cordray to head the CFPB, and the Senate will vote on his confirmation this week. Having a director in place will allow the Bureau to protect consumers from unfair, deceptive, or abusive practices from providers like those that issue payday loans.

Payday Lending and Overdraft Protection

In an article of the Wall Street Journal in January 2014, “Hefty Bank Fees Waylay Solders,” it says that many members of the military are frequent users of bank overdraft protection, which has caused some concern in some quarters, adding:

“Congress cracked down with the Military Lending Act, which, starting in 2007, limited to 36% the APR interest on many payday-style loans to military members.

Since then, overdraft programs have replaced payday lending as the leading financial problem for many military personnel, says Adm. Abbot of the Navy-Marine relief society. Some financial institutions serving the military have reined in overdraft fees, he says, while others are engaged in “predatory or punitive overdraft practices.”

Posted

January 17, 2016

General, su1

Robert

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Comments

4 responses to “Bad Credit Payday Loans”

International

December 19, 2017

The only concrete example in the article of the Wall Street Journal was someone who took out $500 for an unspecified “family emergency.” Obviously, if this soldier was denied any form of credit, he wouldn’t go bankrupt; instead his brother would languish in jail for a week, or his sister would have her car repossessed, or whatever the family emergency was. Whether that result improves overall utility is unclear, but I personally am in favor of letting the individual soldier make the choice about how to respond to a family emergency.

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International

December 19, 2017

“Eliminating access to a particular product (payday loans) doesn’t eliminate the need for credit.”
What happens if the availability of credit is severely restricted? Is it considered better for people who are desperate for such high interest loans to declare bankruptcy instead? Would we need to institute a new bankruptcy-lite system (quick and cheap with no loans discharged, but payments are delayed for some time) to make it more attractive than loan sharks?

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International

December 19, 2017

Anthony Jackson

In general, taking out a short-term high interest loan such as a payday loan means you’re maintaining insufficient cash reserves, and you should either reduce your spending until you achieve adequate cash reserves, or go bankrupt; if you have income sufficient to pay off your payday loans, you have income sufficient to maintain cash reserves high enough that you don’t need payday loans. However, giving people good money management practices via legislation is not particularly likely to work.

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International

December 19, 2017

Well, if taking out high interests loans become a routine for a family due to inadequate cash reserves, they *will” go bankrupt before long with or without a ban on pay day lending. 🙂

I guess my question is whether it is better for them (or the community at large) to make them go bankrupt now or after a few loans. A few high interest loans now and then might sting enough to motivate some people to reduce spending or build cash reserves without the far more disruptive bankruptcy. (I am leaving aside the question of whether the terms of the loan is made clear when the customers take one out.) If they are not the type of who learns or the situation is so dire their only hope is a miracle anyways, is it better for bankruptcy to happen with less accumulated loans?

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