Payday Loan Store
Payday Loan Store
Payday loan store charges their fee and process the amount swiftly. It is given in cash and secured by post dated check. The check includes principal amount plus accrued interest. This could be paid back on or before due date either in cash or through check. If the loan is not paid, then it is rolled over for the next 14 days. But interest on it accumulates very fast. Several companies have however restricted the number of roll over to a maximum of three times and most of them don't allow another loan till the previous one is settled.
These people grant loans to poor borrowers who could go otherwise without loan. It actually helps them to cover out of the blue expenses like utility bills, car and home repair, groceries, rent etc. Payday loan store is a response to diminutive provisional cash needs amid two paydays. To get the loan sanctioned is also very easy. The borrower has to show his bank statement and pay proof, handover a post dated check to the lender and take the loan. Payback options are also uncomplicated. The user recompenses the original amount plus interest on the appropriate date in cash or allows the check to settle up the due.
Payday loan store are incredibly notorious for the reason that it has soaring rate of interest. The lenders often target young but poor people who are least aware of TMV or Time Value for Money. Payday lenders are ironically called loan sharks since they charge dreadfully elevated rate of interest for their unlawful unsecured lend. Interest is so high that a borrower pays $115 for a loan of $100 for one fortnight only.
The operators of Payday loan store say that the amount provided by this loan is so low that the interest could not recover even the processing charge. The lenders also advocate that greater threat of non-payment forces them to charge high interest rate. This is also known as `Risk Based Pricing'.
Payday loan stores have a billion dollar business, but this is a rapacious business which ensnares borrowers in to a debt trap. Interestingly these borrowers have a regular source of income and most of them have full time job.
There are countless raison d'être to convince borrowers to visit payday loan stores. It is high-speed and practical method to solve the immediate pecuniary predicament. It also helps people with bad credit record and is an eleventh-hour cash to pay the bills that could go otherwise unpaid bringing more complications and financial strains. Last but not the least; people's ignorance has also helped the industry swell into a billion dollar business. Despite the fact that some borrowers have regular takings and have around the clock job, they are always in adversity and once they get trapped in the vicious circle it becomes difficult for them to come out of it. The government has, however, opened its eyes and become quite sensitive to the issue and has launched educational drive against it. It has also passed criminal law against those payday loan stores.
However the pressing requirements of the borrowers don't let them calculate the annual rate of interest charged by these Payday loan store or they simply overlook it. In most cases borrowers are helpless and have no alternative except to borrow from these stores. Interestingly it is preferred by low income group people who, in fact, can't afford it.
To skip from further hardship, it is advised that the borrower should first of all tap his own resources like requesting his employer, close friends, or family members for a short term loan. Credit counseling is furthermore advised to the loan addicts. But all suggestions are set aside when the urgent requirement of cash comes in. The government needs to be more serious and sincere in protecting these soft targets of payday loan stores.
There are several payday loan stores both in America and Canada. Since most American stores didn't lend Canadians, many stores came up for their cash requirements. This subsequently grew to a big business and now there are about 1300 stores of payday loans only in Canada. The process to borrow payday loan is also easy. The processing time varies from half an hour to twenty four hours. When the processing of a payday loan store is compared with that of banks, it proves much faster. The loan approved is proportional to the income of the borrower.
It's also popular because it also helps people with bad credit record and the bank's inefficiency to provide small, short term loans. These reasons have brought this business to such a colossal proportion.
But Payday loan store are not without criticism. It is said that they charge a very high interest rate and target young and the poor who are not in a position to calculate TMV or Time Value for Money. They are also alleged as loan sharks. [Loan sharks are in fact those individuals or organizations who offer illegal, unsecured loan at high rate of interest.] It has also been alleged that these companies typically inform borrowers about interest fee only, whereas they add handling fee, administrative fee, finder's fee, brokerage etc., which takes the interest to a criminal range and flouts the federal law of not collecting more than 60% p.a. Payday loan is, in fact, paid back several times as fees. It is an endless trap.
Payday loan stores have their own arguments and they refute all the charges leveled against them.
It is also suggested that this loan should be borrowed only up to the manageable extent so that it could be fully paid back at the time of maturity. If loan for a longer duration is required then it is suggested to tap other sources like borrowings from employers, friends, consolidating debt at bank etc. It is also advised that persistent borrowers should take credit counseling.
Payday loan stores have also tried to make their functioning efficient and transparent. It is in favor of clear and full disclosure of charges, collection of dues in a fully professional way, educating the use of loan and availability of debt counseling services. They have also provisions of penalties for those members of the association who violate its code.
Payday loan stores do what the banks do not. Some people suggest that this loan should be avoided completely. But it could be availed after an astute decision. The reasons of its being popular are that it does not ask for collateral security but only job and a checking account. Furthermore it depends upon the borrowers to decide when to pay back the loan. He could simply pay the fee on the loan and extend it till the next payday. Payday loan stores are springing up like mushroom and advertised on radio and local TV channels. It is estimated that there are about 10,000 payday loan stores in the USA only and they collect about $2 billion every year as fee and interest charges.
There are several consumer protection agencies on both government and non-government level to provide guidelines to borrowers and offer free information on these and other consumer issues.
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