A payday loan is a type of short-term loan, with most requiring repayment within two weeks. The meaning behind the term is due to payday loans usually being used for purchases between incoming paychecks. They are marketed to those who need money in a hurry, with the entire application and approval process taking mere hours, sometimes minutes.
Preying on the Vulnerable
People with poor credit, who are not able to secure personal loans with more attractive rates and fees, are sometimes pressed to obtain a payday loan. The person who is borrowing can do so without having their credit history scrutinized. Most payday lenders will verify the information that was provided to them, which will typically include income and bank account details. Lenders will use this metric to determine your ability to pay, instead of using traditional credit scores. FICO scores are not only designed to protect lenders, but they are also designed to insulate uninformed borrowers who may not fully understand the fees that are tacked-on to these fringe loans.
Not only do payday loans target vulnerable communities, but they are usually an overall bad financial investment. Payday loans usually add a $15 fee for every $100. For a loan of $500, the fee might be as much as $75. This is interest that is charged for just a few weeks. If you annualize that charge, that is equivalent to a loan with an interest rate of nearly 300%!
Standing Up Against Predatory Lending
A combination of regulatory scrutiny and a more educated population has reduced the popularity of payday loans in the past few years. Unfortunately recent regulations have ensured payday loans are not going away or becoming a relic of the past. The Consumer Financial Protection Bureau has been at the forefront of payday loans regulations and is supposed to be cracking down on their deceptive practices.
Keep in mind that even if payday loans die a timely death, there will always be a need for short term loans and lenders or credit organizations that will take its place and bleed financially vulnerable individuals. If you are a victim of payday loans and you are finding yourself in a financial black hole due to their fees, contact Progressive Debt Relief.
Professional Payday Loan Relief
With established relationships with all the major payday loan companies and creditors, Progressive Debt Relief has the experience and ability to settle payday loan debt efficiently and discreetly. Our financial experts will work with your creditors to negotiate and settle your payday loan debt for good. To find out more about our services, or to schedule a complimentary consultation, contact us today.
